Interactive Brokers: ScaleTrader

Interactive Brokers: ScaleTrader

I am a huge fan of automating my stock strategies as it usually means that I won’t have to worry that I keyed in something too slowly on my phone or computer when trading. Or worse I made a mistake when buying or shorting a security like what happened below!

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On the bright side that mistake cost me less than $5 with commission.

So what is ScaleTrader? ScaleTrader is a tool that interactive brokers has to scale into and out of a position, normally used if you want to buy larger amounts of stocks over a given period of time and a range. I personally use it to make money off of volatile stocks such as DUST and occasionally less volatile ones like SLV. Let’s take DUST for example, I short and long this position often as it’s all over the map. Here is an example of a short approach that I am using to make money as it goes up every dollar and then goes back down.

I want to have a maximum of 5 short positions open, with 100 shares per lot, spaced out every $1.00 between a certain range. With ScaleTrader I define the maximum position as 500 (5 lots of 100 shares), then I specify the increment. You can specify a different initial size if you wanted to start with 300 shares for example, and scale up 100 at a time. I then give it the starting price (where you want this to start), the price increment, then specify the order type. I normally use limit. To set the goal for each lot, I set the profit offset to $1.00. Now this is probably the best feature, the “Restore size after profit taking”, this enables it to reopen the position it closed out. For example, if you had shorted DUST at 38, and it hits 37 during the day and buy to cover, then goes back up to 38, it would short it again, then have an order to buy to cover at 37 again.

Some people use this type of order for a day, others set it to Good Until Cancel (GTC), I typically use Good Until Date (GTD) as I have a number of days in mind I want to run this. Use caution when using ScaleTrader, it is only as smart as you tell it to be and can burn through funds rapidly.

ScaleTrader Example
ScaleTrader Example
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