ScaleTrader

ScaleTrader is a sophisticated trading algorithm within Interactive Brokers’ platform that helps traders scale into large positions efficiently. The essence behind the algorithm is that it allows investors to buy at decreasingly lower prices or sell at increasingly higher prices. ScaleTrader can be used to buy or sell positions in single instruments, pair trades, or combinations. Investors can use ScaleTrader to trade Stocks, ETFs, Options, Futures, FOPs, Currencies, Bonds, and Warrants.

In this example, the investor will use ScaleTrader to create an order to buy 5,000 shares of Exxon Mobil. They start by choosing the ”Simple” tab, type the symbol XOM into the upper left-hand side. Next, they choose “Buy” as the action. As previously noted, the ScaleTrader can be used to create sell orders as well. Next, the investor enters 5,000 for the maximum position and 200 for the initial component size. For the subsequent component size, they also enter 200. Note that input fields colored pink require a user entry.

The investor then enters the initial starting price and since this is a buy order, this will equal the top price that the investor will pay. They then choose the price increment, in this case they will use 15 cents, and the algo will automatically calculate the bottom price based on the number of price levels. In this scenario that would require 25 order slices, using the 15-cent price increment. Finally, the investor selects the order type, they will use a limit order. There is a Summary of the order information underneath the chart. This also shows the number of price levels, average price, the total dollar amount of the order, and the range of the order in dollar and percentage terms.

When ready the investor clicks on the Transmit button at the bottom of the screen and an Order Confirmation window appears. Once they review, they can click on Transmit and ScaleTrader is activated.

In this simplest form, the investor can see the buying range over which they are buying or accumulating shares using a specified price decrease for each level of the order. The investor can determine whether the time in force is for day only or could let it run as a good-til-cancelled order to take advantage of a gradual decrease in prices to build a position.