Picture yourself navigating through another choppy day in the markets, when along comes an email alert:
(yes, it's fictitious) has finally climbed past its 200-day moving average and is trading at 200% of its average daily volume! Now's a great time to ride along for a couple of points, you think.
To get alerts like that you used to have to subscribe to a high-end quote service or open an account with an online brokerage that catered to active traders. But a new Web site,
Xigo.com, sends them to you free. Just set up a portfolio and program in the kind of alerts you want to receive for each of your stocks. Maybe you want to know when OneHitWonder's price-to-earnings ratio drops below 10,000 or when an analyst sets a new price target for the stock. You can even enter key words of your choice (such as "CEO indicted" or "alliance with Microsoft") into Xigo.com's news-search feature. And you'll get an alert whenever those words appear in an article or press release related to the company.
I know what you're thinking: Lots of Web sites and online brokerages send out alerts like these. But Xigo.com goes to the next level. Its alerts are triggered by real-time data.
Monstrous Amounts of Processing
Xigo.com is one of a handful of stock-screening sites that operate in real time. As I wrote in a column
last June, stock screens -- whether real time or delayed -- are all basically just data-mining tools. You select the kind of attributes you'd like a stock to possess. For example, let's say you're searching for low-beta technology stocks with a daily volume between 20,000 and 80,000 shares and a price range between $15 and $30. No problem. The screen scours through end-of-day financial data and comes up with a list of stocks that meet those attributes.
Real-time stock screens are a lot more complex. For one thing, they eat up monstrous amounts of processing power. That's because they must continuously scan market data. And the data are constantly changing. Real-time stock screens also allow you to search for a laundry list of criteria, from financial ratios to technical indicators to analyst upgrades. It's up to you to figure out what combination of indicators works best for intraday trading. You receive an alert only when all the criteria are met.
And in some cases the criteria you search for can get pretty arcane.
TraderBot.com, another real-time screening service, lets you search for things like changes in the spread between bid and ask, volume spikes (where trading volume suddenly jumps up and then retreats), and gap openings (where a stock moves up or down in price from the previous day's close), along with an ample list of technical and fundamental indicators.
Building an effective screen based on these indicators may seem like too much work. If that's the case, TraderBot.com provides you with an alternative. You can select from a library of prebuilt screens. These are patterned after the trading methods of several professional daytraders. The cost for the entire service is $40 per month. Or use it after the market close for free.
At least three brokerages that cater to active traders integrate real-time screening features into their execution platforms. And, of course, that kind of setup can save you precious seconds when an opportunity pops up.
CyBerCorp's CyBerQuant screening tool comes as part of a platform that includes real-time charting and quote delivery. Commissions are $18 or lower, based on volume.
TradeStation.com's system is scheduled to go online sometime this year. Its commission schedule will reportedly be competitive with CyBerCorp's. As I said in a
previous column, the TradeStation.com system is unique because it lets you, in effect, create a stock screen and then back-test it. That means you can devise a strategy to see how well it might have performed in the past year or in a year when market conditions were similar to those of the present.
A reader named Mark told me about another online brokerage,
JPR Capital, that has a real-time screen called Whisper. Alerts triggered by Whisper appear in a "dynamic" window on your monitor. In other words, there's no need to hit refresh every time you want to view changes. Whisper costs $100 per month; commissions run at about $10 per trade. You're also charged fees for software rental and data if you execute fewer than 200 round-trip trades per month.
Pristine.com, a Web site that provides training to active traders, also operates a real-time screening tool called
Pristine ESP, which is linked to a trading software platform called the
Executioner. However, the screen was off line due to technical difficulties as of late this week.
Intuition Vs. Artificial Intelligence
SmartMoney.com is also planning to launch a real-time screen. More sites will likely follow. A year from now, real-time screens should be commonplace on the Web.
And that brings us to the question: Just how useful are they?
Real-time screens can certainly help you define the rules by which you make intraday trades. For example, if you're convinced you should buy only stocks climbing toward their 50-day moving average on high volume, you can program that rule right into your trading system. If you absolutely won't buy a stock unless it has produced real-life earnings, you can screen out the nonperformers. And you won't be distracted by them.
But real-time screens also have some potential drawbacks. First, there's the danger you'll get carried away and build in so many criteria that any results will be useless. Most traders I've talked with say it's best to stick with the two to three indicators you know best.
Another danger is that traders will set their screening parameters too broadly. They'll scan the entire market, in other words. When an alert sounds it might be on a stock they don't know much about. But they'll jump in anyway.
Most successful traders closely follow a finite list of stocks -- anywhere from a handful to 300. They watch the stocks' numbers run by on their tickers all day long. And at night they pore over the stocks' charts. Ask them and they'll likely tell you that watching the prices of the same stocks stream by day after day and studying the same charts night after night gives them an intuitive feel for how their select group of stocks trade.
Can a real-time screen duplicate that kind of experience? Not likely. All these screens appear to be knee-jerk programs. By that I mean, when you enter a request, the program delivers that request, nothing more, nothing less.
Someday we'll likely see a measure of artificial intelligence incorporated into real-time screens. For example, neural nets, which are a kind of AI software, might vary the weight given to different criteria you select, depending on market conditions.
Ward Systems, a company well known in this area, already markets a neural net for daytraders. Genetic algorithms, another species of artificial intelligence software, can mimicliving organisms and actually evolve an optimal real-time screen. And programs incorporating fuzzy logic could seek out stocks that "almost" meet your selection criteria or "might shortly" meet it.
Bottom line: Real-time screens are great. But what's coming will be even better.
Mark Ingebretsen is editor-at-large with
Online Investor magazine. He 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