Ease of Use
Integration Into Existing Strategies
TradeSmith TradeStops and Ideas are two separate products formed by a mathematician and investor, Dr. Richard Smith. TradeSmith TradeStops and Ideas is designed to help its user manage a healthy portfolio of stocks. Does TradeSmith TradeStops and Ideas have what you need? Read our review to find out.
Introduction to TradeStops and Ideas by TradeSmith
TradeStops and Ideas by TradeSmith are two separate but related products offered by Dr. Richard Smith, a mathematician and investor. These products are designed for medium to long-term investors who want to actively manage a healthy portfolio of stocks.
TradeStops focuses on calculating the risk associated with stocks based on their historic volatility and balancing portfolios based on this risk. Ideas works as a complementary platform by helping traders design a portfolio based on different investing strategies and the stocks that that world-renowned investors are holding in their own portfolios.
Are TradeStops and Ideas right for you? Keep reading our TradeSmith review to find out.
TradeStops and Ideas are sold as separate products, and there is unfortunately no option to purchase both at a discounted rate.
There are four TradeStops plans available:
- Basic – $228/year. Includes trailing stops, volatility quotient, position size calculator, and stock analyzer.
- Plus – $588/year. Adds stock health status indicators and alerts.
- Premium – $999/year. Adds a portfolio volatility analyzer, risk rebalancer tool, and asset allocation calculator.
- Pro – $3,000/year. Adds stock picks based on billionaire investors’ holdings.
There are two Ideas plans:
- Basic – $499/year. Includes 4 proprietary trading strategies.
- Premium – $3,000/year. Includes 7 proprietary trading strategies.
TradeSmith doesn’t offer a free trial for either TradeStops or Ideas, but all plans come with a 60-day money-back guarantee.
Volatility Quotient and Stock State Indicator
TradeStops is designed to calculate the risk presented by each of the stocks in your portfolio. It does this using two metrics it calls volatility quotient (VQ) and stock state indicator (SSI).
VQ assigns a percentage value to the volatility of a particular stock. This can then be used to determine how far below the current price a trailing stop loss must be set in order to not stop out prematurely. It’s also used to identify the maximum potential loss on a stock when using trailing stops.
The SSI is a green-yellow-red indicator that calls attention to whether a stock has experienced high volatility and whether it has recently triggered an entry or exit signal.
VQ and SSI are automatically calculated for all stocks in portfolios monitored by TradeStops and form the basis of the platform’s more advanced risk management tools.
Position Size Calculator
The position size calculator uses VQ, trailing stop calculations, and your appetite for risk to determine the appropriate amount to buy of any stock. The calculator asks you how much money you’re willing to lose on a given trade and then offers several options for calculating where a trailing stop should be placed. The output is the maximum amount you should invest and the initial stop loss value you should use for your trade.
Helpfully, TradeStops explains the results of the calculator in plain English. This makes it easier to understand how it got to the results it did and how changing the parameters will affect the result.
Asset Allocation and PVQ Analyzer
The asset allocation tool is hardly unique to TradeStops, but it is helpful to have it included alongside TradeStops’ other portfolio analysis tools. Essentially, the asset allocation tool allows traders to see how their holdings are divided into different market industries and sectors.
The PVQ analyzer tool similarly categorizes assets, but according to risk (based on VQ) rather than market sector. With this tool, investors can quickly get a sense of whether a portfolio leans towards low, medium, or high risk. Note that this tool can also be applied across multiple portfolios, which is useful for investors who have multiple portfolios intentionally segregated by risk.
The risk rebalancer tool uses VQ across one or more portfolios to help investors reduce the average VQ of their holdings. The tool simply calculates how changing the number of shares of existing holdings can achieve a significant reduction in overall risk potential. Importantly, the risk rebalancer allows the option of locking some holdings or excluding specific holdings within a portfolio from the analysis.
Alerts are a big part of monitoring activity within portfolios within TradeStops, and there are a lot of options for setting alerts. You can set alerts based on VQ exceeding a certain threshold or a change in the SSI state of a stock. You can also create alerts based on stock price, giving you plenty of leeway to set alerts around trailing stops.
Ideas is useful for both short-term traders and long-term investors. It offers one of the most accessible and informative snapshots of stock market volatility of any financial news or analysis platform. Ideas breaks down the market into major indices, using color-coded displays to show what fraction of the stocks in each index are high risk (red), medium risk (yellow), or low risk (green) based on their volatility quotients and calculated entry and exit points. You can also dig deeper into each index to see how its risk breakdown has changed historically and where the financial markets stand relative to their one-year highs and lows.
Helpfully, Ideas goes beyond just the major indices. You can generate the same visualizations for each market sector.
The heart of Ideas is the so-called “Dr. Smith’s Lab” area, where the platform organizes stocks into different investment strategies based on their VQs and SSIs. This is similar to how Zacks uses its proprietary metrics to recommend stock picks.
Dr. Smith’s Lab portfolio categories include 7 strategies:
- Best of the Billionaires
- Kinetic VQ
- Low Risk Runners
- Sector Selects
- Dividend Growers
Many stocks fall into multiple categories and this is called out in the portfolio display.
The integrated stock finder tool is essentially a stock screener with additional parameters based around VQ, SSI, and the portfolio categories found in Dr. Smith’s Lab. There are relatively few technical indicators available within the stock finder and even fundamental filters are somewhat scarce. So, traders need to be fully committed to finding trade ideas based on VQ and potential risk when using the stock finder.
Combining TradeStops and Ideas
Ideas and TradeStops are designed to be used together, even though they’re sold separately. The Ideas platform facilitates this by making it incredibly simple to export stocks to a new portfolio, which automatically transfers over to TradeStops for users who have logins to both platforms. To create a new portfolio from Ideas, traders can simply check a box next to every stock in the stock finder results or in Dr. Smith’s Lab that they want to add to the new portfolio.
The overarching idea behind this combination is that traders and investors should be able to identify potentially profitable stocks to trade using Ideas, then see how those stocks will work within a new or existing portfolio using TradeStops. This is where the risk rebalancing and position size tools in TradeStops are especially handy: when you want to add a new stock to a portfolio, you can use these tools to figure out exactly how many shares to buy and how to maintain the risk profile of your portfolio.
Customization, Layout, and Compatible Brokerages
Both TradeStops and Ideas are browser-based platforms with no mobile or desktop applications available. While the platforms are generally easy to navigate, options for customizing the layouts are limited. Most of the settings relate to alerts.
TradeStops is able to import portfolio data from most major brokerages. If a brokerage cannot communicate directly with TradeStops, it is also possible to input data manually or to import it from a CSV. TradeStops can import and monitor an unlimited number of portfolios.
How Does TradeSmith Compare?
TradeStops and Ideas together form a complete portfolio management solution based almost exclusively around balancing risk. These tools don’t offer much fundamental or technical analysis in the traditional sense. However, they can be used together to generate new trade ideas and integrate new positions into a portfolio. The color-coded SSI system is handy since it makes it easy for investors to know what’s going on within their portfolios and in the markets as a whole with just a single glance.
What Type of Trader are TradeStops and Ideas Best For?
TradeStops and Ideas are designed with medium-term investors and multi-portfolio investors in mind. They are highly focused on risk management and work best for traders who understand how much risk they are willing to take on any individual trade and across their portfolio as a whole.
Keep in mind that these platforms together can be quite expensive. So, they are best suited for investors who have relatively large portfolios.
Alternatives to TradeSmith
TradeSmith is a pretty unique platform and you won’t find highly similar risk management tools elsewhere. That said, if you’re more focused on assembling a profitable portfolio than tightly managing volatility risk, there are other stock picking and research platforms that might be more suitable for you.
Motley Fool and Gorilla Trades each offer stock picks that can help you build a portfolio. Motley Fool is aimed at long-term investors, while Gorilla Trades is more short-term and active. Gorilla Trades in particular uses stop losses for basic risk management, although balancing risk isn’t the service’s main focus.
If you want stock ideas and support for performing your own fundamental and technical analysis, you might prefer Zacks Premium or Investors Business Daily. Zacks Premium offers lists of top-rated stocks, while Investors Business Daily has multiple products for identifying stocks with strong technical setups.
- TradeStops makes it easy to rebalance risk across an existing portfolio as new stocks are added
- Position size calculator allows traders to invest based on maximum allowable loss
- Color-coded SSI system is highly visual and gives information at a glance
- Ideas offers stock ideas and a stock screener based on risk and volatility
- Ideas market risk dashboard is one of the best visualizations of overall market performance
- No discount for buying both platforms, so the total cost is quite high
- Does not necessarily integrate easily with fundamental- or technical-based trading strategies