August 30, 1999

Electronic Investor

'Net Reductions

Online commission rates are falling again

REVIEWED BY THERESA W. CAREY

Edited by Randall W. Forsyth

How low can they go? In our annual review of online brokers ("Growing Pains¹," March 15), we opined that commissions had dropped about as much as they were going to go, and we even noted several increases in fees. But now, with growth in online trading slowing ("Hitting the Wall²," July 19), some brokers are cutting commission rates again.

Firstrade, reviewed in the August 26 edition of Barron's Online ("Firstrade Is a Long Way From Number One³") recently dropped its market order commissions to $6.95 (limit orders remain at $9.95). E*Trade has offered a break to active traders who make more than 75 transactions in a quarter; after that, market orders are charged just $4.95 rather than $14.95. Other cuts may be on the horizon.

Meanwhile, Charles Schwab, which has kept out of the price war, has introduced a new way for its more affluent and active clients to trade. Called Velocity, it bypasses your Web browser and connects directly with the broker. We plan to review it for Barron's Online in the not-too-distant future.

With most online broker fees ranging from $5-$30, we had thought earlier this year that price alone would be less of a factor in the typical Barron's reader's decision to go with a particular firm. What is the most important consideration for you when selecting an online broker? And for those of you who are not yet trading online, what's the main reason you've held out this long? Let us know via e-mail at electronicinvestor@mailcity.com⁴.

We've received customer-service-related complaints about two dozen different brokers now, with problems ranging from deposits incorrectly applied, to tax-deferred accounts improperly set up, to, of course, the common "I couldn't log in and missed the trading window on this stock." If it makes you feel any better, a Merrill Lynch customer wrote us and said that his market orders always seem to execute at the high price for the day. While that's obviously impossible to verify, we reiterate our recommendation to use limit orders for your trades to make sure you get the price you expect -- whether your broker is online, touchtone, full service or wireless.

Speaking of wireless, the main feedback we got from our August 2 column on the Palm Pilot VII were queries about how it stacked up against other wireless devices. The plan is to take another look at some of the other gadgets available for investors later this year, including the BlackBerry handheld and Aether Systems services.

A representative of Fidelity Investments took us to task for not mentioning its wireless capability, and noted that a small set of their customers has access to wireless trading (via Palm VII and the RIM Inter@ctive 950 two-way pager) already. Fidelity's wireless trading program, called InstantBroker, is currently available only to those considered active traders, with 36 or more transactions per year, or those with over $100,000 in assets in their brokerage accounts.

Investor Insight Requiem Redux: It's been a year since Intuit's Investor Insight was shut down, but we still hear from readers who lament its demise. Thanks to the eagle eyes of several Electronic Investor readers, we've located a program that replaces some of its functions while acting as a financial news and quote management "portal." QuotesNow! by Windows Xpert Systems (http://www.quotesnow.com/⁵) is a shareware program that you can download from its Website and use for a limited time before deciding whether or not to pay the registration fee ($34.95). We took a look at the current version, 2.51. QuotesNow acts as a collection point for news, price alerts, graphs and messages on Yahoo Finance and Motley Fool. The program lets you follow stocks, mutual funds, options and indexes.

QuotesNow! acts as a financial news and quote portal, gathering prices, charts and messages in one place.

You can export to Quicken or Metastock, but QuotesNow can't read the data in those other programs, which means some duplicate typing is in store when you set it up. QuotesNow ties into your choice of free quote servers, so if one is down you can just tell it to look somewhere else. It'll automatically refresh your quote list, but if you find that slows your system down too much, you can specify a certain group of stocks as "Priority" and have those update more often, while the others update at less frequent intervals. It doesn't have the portfolio management capability of programs like Reeally! and Captools, but if you need just a quick layout of the stocks you're following and their current status, QuotesNow does an adequate job.

Elliott Wave Analysis: Here's a neat toy for you technical analysis junkies with money burning holes in your collective pockets. WinWaves 32, published by International Trading (http://www.internationaltrading.com/⁶), is a program that lets you calculate an Elliott Wave map that uses your computer to crunch through incomplete patterns and generate a probability chart. Elliott aficionados claim that a properly created and interpreted Elliott map can predict market trends with 90% confidence. The Wave Principle is essentially a measure of mass psychology and describes 13 patterns detailed by Ralph Nelson Elliott back in the 1930s and '40s. (A good explanation can be found at http://www.elliottwave.com/⁷.)

WinWaves takes a data set and works out which patterns best fit it, then extrapolates those into the future. Like other statistical forecasting techniques, the wave analysis works best when it develops a model based on a larger data set, so a lightly traded stock won't generate a very accurate forecast. Be sure you have a fast computer with a high-resolution monitor as well as the $1,250 it takes to register the program. Check it out by downloading the demo from the International Trading Website. The demo itself is worth running as an exercise in learning more about the markets.

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