Sunday, January 4, 2015

commission free etf's on tos

previously, one couldn't participate in the commission-free etf program from a thinkorswim account. i don't know when that changed but its no longer true. i do it all the time now.

there's an advantage to trading the com-free's from tos because one can utilize advanced order types that are only available on tos. for example, trailing buy-stops are rejected by the tda web accounts but work on tos. also, you can make use of tos's advanced order-triggering mechanisms. i recently found utility for the advanced order called 1rst triggers sequence. this order type creates a queue of orders that are sent to the market in sequence as each one is filled. here's a screen shot of one of my sequenced orders:
commission-free etf, ewu, with queue of single share buy orders
each of these orders is a duplicated 20 cent trailing buy-stop-limit to purchase a single share. the trailing buy-stop is a wonderful tool that will defer buying into a falling market. as the price moves down, the stop price will move down with it but 20 cents higher. when price moves up by 20 cents the stop is triggered and the order converts into a limit-order at wherever the stop price has migrated to. regular stop orders convert into market orders, which is great for exiting trades, but i like stop-limits for trade entry to help prevent unfavorable fills on a gap-up in price. the 18.50 price is the current ask price and controls where the initial stop sets up, at 18.70. once the market is open the stop will shift down to 20 cents over the mid-bid-ask price (or mark-price) and maintain that relationship thereafter. 

the basic idea here is to accumulate shares when the market is rising. choppy markets may trigger buys without trending price movement but that's mitigated by the small number of orders in the queue. once the queue is empty one can re-evaluate the trend and adjust the parameters for the orders. for example, a bigger trailing-stop will throttle back the fills in a choppy market. in general, i like a 1% trailing stop on etf's yielding above 5%, 2% trailing stop on 4% yield and 3% on 3% yield. when an etf gets under 3% yield i don't refill the order queue. that's my plan to accumulate a small number of shares in a diverse number of temporarily high-yielding etf's. alas, dividend payouts may vary and not always to the upside.

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