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.
TradeStops and Ideas are sold as separate products, and there is unfortunately no option to purchase both at a discounted rate. TradeStops costs $79 per month after an initial 30-day trial period, while Ideas costs $99 per month after an initial 30-day trial period.
Volatility Quotient and Stock State Indicator
TradeStops is designed to calculate the risk presented by each of the stocks in a portfolio, and it does this using the volatility quotient (VQ) and stock state indicator (SSI). The VQ assigns a percentage value to the volatility of a particular stock, which can then be used both to determine how far below the current price a trailing stop loss must be set in order to not stop out prematurely and 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 features.
Position Size Calculator
The position size calculator uses VQ, trailing stop calculations, and traders’ appetite for risk to determine the appropriate amount to buy of any stock. The calculator asks traders how much money they are willing to lose on a given trade and offers several options for calculating where a trailing stop should be placed. The result shown is the maximum investible amount and initial stop loss value that equates to those parameters.
Helpfully, TradeStops also explains the results of the calculator in plain English, making 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, so their quantities are not changed and 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. Alerts can be set based on VQ exceeding a certain threshold or a percentage change or on a change in the SSI state of a stock. In addition, TradeStops allows alerts to be set based on price, giving traders plenty of leeway to set alerts around trailing stops.
Ideas makes itself useful to both short-term traders and long-term investors alike by giving one of the most accessible and informative snapshots of the stock market of any financial news or analysis platform. The platform breaks down the market into the major indices, showing in clear, color-coded displays 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. Ideas, in turn, makes it easy to dig deeper into these indices to see how their risk has changed historically, as well as where the indices stand relative to their one-year highs and lows. Plus, traders can see exactly which stocks fall into each risk category in the Stock Finder display (see below).
Helpfully, Ideas goes beyond just the major indices and performs the same risk breakdown for stocks by market sectors and for commodities.
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 their proprietary metrics to create stock recommendations.
The rationale behind some of these categories of stocks is unclear – for example, “Best of the Billionaires” and “Kinetic VQ” – while others are more obvious – “Growth,” “Value,” and “Low Risk Runners.” Many stocks fall into multiple categories, and this is called out in the portfolio display.
The stock finder tool is essential 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.
Integrating 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 potential new stocks to trade within Ideas and then see how those stocks will work either within a new portfolio or within an existing portfolio within TradeStops. This is where the risk rebalancing and position size tools in TradeStops come in especially handy – when interested in adding a new stock to a portfolio, traders can use these tools to figure out exactly how many shares to buy and how to maintain the risk profile of their existing 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, although it is possible to create template sets of alert settings that for when traders are working through different strategies or with different portfolios.
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.
TradeStops and Ideas together form a unique portfolio management platform based entirely around risk identification and balance. While these tools do not offer much fundamental or technical analysis in the more commonly used sense, they can be used together to identify new trade ideas and to integrate those trades into a broader portfolio framework. 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.
TradeStops and Ideas incorporate stock-picking elements that you would find in services like Motley Fool and Gorilla Trades with personal research tools that you would find in similar services from Zacks Premium and Investors Business Daily.
What Type of Trader are TradeStops and Ideas Best For?
TradeStops and Ideas are designed with medium-term investors in mind, and particularly investors who prefer to actively manage multiple portfolios. While these platforms can be used in conjunction with fundamental and technical analysis strategies, they are highly focused on risk management and work best for traders who have a strong concept of how much risk they are willing to take on with each trade and across their portfolio as a whole. Keep in mind that these platforms together are quite expensive on an annual basis, so they are also somewhat limited to use by investors who have relatively large portfolios.
- 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