When markets get really nasty, many active traders stay alive by narrowing their focus. Swing traders who normally hold positions for days morph into daytraders who hold positions for hours. Daytraders become scalpers who jump in and out of trades in minutes. Why? In a nervous market no one can predict what will happen over the next week, or even tomorrow. But it may be possible to discern so-called microtrends that play out over hours -- or sometimes minutes.
Streaming Quote Series
Choosing a Streaming Quote Service
Sizing Up Three Streaming Quote Services
Making Watch Lists Work for You
For that kind of trading, you need a high-end streaming quote platform. Web-based high-end quote platforms are eons ahead of the kind of quote displays mainstream brokerages provide -- even to their active trader customers. (See my recent
series on mainstream broker active trader platforms.) And high-end services incorporate important features you won't find on entry-level platforms like
Money.net and the basic
MyTrack packages I
talked about last week. They'll also run you more money -- starting at about $90 a month and going up to $300 or more.
This week I review the features you should look for in a high-end streaming quote platform. Next week I'll review three specific platforms:
A high-end quote platform should incorporate a real-time news feed. Some feeds, such as Comtex, may come free. You should also be able to add from a menu of choices. The
business news wire is usually a good choice, because legions of other traders watch it. If you're trading index options or index futures, an
feed might be useful, because broader indices can move on nonbusiness news.
If you trade with charts, you want choices in how you construct them. For example, you should be able to look at a stock's daily closing prices over the past three months, then zoom in to a bar chart that depicts trading action in three- or five-minute increments. You should be able to overlay a long list of technical indicators. The charts should build quickly. And you should get lots of choices in the way you size charts and choose color schemes, so they'll be easy to read.
Most quote systems are set up to alert you when a stock reaches a target price or broaches some technical indicator, such as the 50-day moving average. High-end quote systems often incorporate real-time stock screening features that locate opportunities according to the parameters you set. An example is stocks with low price-earnings ratios that just broke through their 200-day moving averages on higher-than-normal volume. (Here's a recent Tools of the Trade
column about real-time stock screens.)
High-end quote platforms spew out more information than you can comfortably fit on one monitor. That's why some traders opt for multiple monitors, upward of eight. They may use four to watch charts of the stocks they're following. A couple of others might dispense market news while yet another monitor could be reserved for entering orders. Traders typically move up gradually from one to, say, two, then four or six monitors. Make sure the platform you select easily accommodates multiple monitors.
Some traders find a "time sales" window more useful than a real-time intraday chart. The two essentially perform the same function: recording the price and amount of each transaction as it occurs. Only difference: A time-sales window depicts these data as a list instead of in a line. Daytraders use this information to discern short-term trading ranges. If most of the day's trades fall within a price range of $10.75 to $10.95, for example, those might be good short-term measures of support and resistance and could signal entry and exit points. The better quote services store a day's or more worth of time sales data.
Entry-level trading platforms such as Money.net's Screamer allow you to enter specific
options contracts and track their price movements in real time. But to really get a handle on what's happening, you need to be able to monitor an entire options chain. This is a list of all contracts available for a specific underlying stock, arranged by the
expiration date and
strike price. Watching an options chain update in real time can be useful even if you don't trade options. That's because options pricing factors in what people believe a security's price will be in the future.
Like options data, futures give you a glimpse of where sophisticated traders believe the markets may be headed. Though these folks aren't always right, as with options, their trades may create self-fulfilling prophecies.
After-hours trading data
Oddly enough, this feature is not as common as you'd think -- odd because after-hours trading is becoming an increasingly important way to gauge market sentiment before the open. Yes, anyone can put up the
Archipelago screen and monitor the action before and after market hours. But by integrating after-hours trading into the quote-feed program, you can build charts depicting overnight action and perhaps set up orders.
Built-in Internet browser
An integrated browser lets you surf without disturbing your screen layout.
Outstanding chart programs, news services and real-time stock screens are all over the Web. You pay for a high-end quote platform to save you the trouble of jumping from site to site. Speed counts with daytrading, and you need to be able to act on the info you receive. The best quote systems tie their displays directly to an order-entry window that sets up an order for you automatically. (They're able to do this because they've made a deal with brokers.) That way, when an alert sounds that your favorite chip stock is approaching your target price, a single click can bring up a dialog box already set up with your default order (100 shares, limit price 1/16th below market, for example).
OK, now that you know what to shop for, next week I'll check out WindowOnWallStreet.com, DTNIQ and RealTick. If you have experience using any of these, drop me a line at
firstname.lastname@example.org. My thanks again to those of you who have already shared your experiences.
Mark Ingebretsen, author of the newly released book, The Guts and Glory of Day Trading: True Stories of Day Traders Who Made (or Lost) $1,000,000, has written for a wide variety of business and financial publications. Currently he holds no positions in the stocks of companies mentioned in this column. While Ingebretsen cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to email@example.com.TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon purchases by customers directed there from TheStreet.com.