is TradeStation legit

TradeStation Review: Is It Safe or a Scam in 2024?


Is TradeStation Safe?


TradeStation is a brokerage firm that started off as a product/software built by Omega Research. Omega Research was started by two brothers named Bill and Ralph Cruz in 1981. In 1991, the brothers ended up creating a software that would allow traders to automate and code their own strategies, which they ended up naming TradeStation.

In 1994, Omega Research entered a deal with Dow Jones Telerate to offer the TradeStation product to institutional clients all over the world. The company was named TradeStation in 1991, and they converted to a full-service online brokerage in 2001. Monex Group in Japan acquired TradeStation in 2011.

TradeStation is known for its tools that allow customers to back test their trading strategies. It is also known for having direct-market access and great charting platform. As a company that has been around since the 1980s and has a large history among active traders, it can be said that TradeStation is a safe company.


Is TradeStation a Scam?


TradeStation offers a significant number of investment products from stocks, bonds, mutual funds, exchanged traded funds (ETFs), options, and futures. TradeStation does not offer commodity trading.

TradeStation has been registered with the SEC since 1996 and is also a member of Financial Industry Regulatory Authority (FINRA). They operate all over the world and have a reputation in the trading industry of being a well-run, established company, which makes it very doubtful that TradeStation would be a scam.


Is TradeStation a Legitimate Firm?


TradeStation is registered as a broker-dealer and an investment adviser. This means that they are paid for giving advice to their customers about securities and other investments that they offer, and that they clear their own trades.

TradeStation conducts 13 types of businesses, shown below.


Is TradeStation a Legit


TradeStation has an agreement with WedBush Securities which clears futures and futures options for TradeStation customers.

TradeStation is registered to do business in all 52 states in America, and TradeStation has a division called TradeStation International which allows them to do business in a handful of other countries. See the below graphic for details.

They are not suspended with any regulators, and they are registered with 11 self-regulatory organizations.


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Is TradeStation FDIC/SIPC Insured?


TradeStation is not a bank, so is not FDIC insured. TradeStation is a member of SIPC (Securities Investor Protection Corporation) and therefore insures its clients up to $500,000 ($250,000 in cash) if the company went bankrupt. This is a positive sign and gives traders and investors confidence that they are a legitimate company.


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Is TradeStation Free?


TradeStation offers free-commission trading on stocks and options to compete with other brokers that have made the switch to commission-free trading. Although they offer commission-free trading, TradeStation charges $0.60 per options contract.


TradeStation Complaints


TradeStation Securities is not BBB accredited.

Investopedia reviewed TradeStation and granted them 4.5 out of 5 stars. They state that it is stable and reliable and highlight its charting tools, back-testing and automated technology.

They also mention TradeStation’s TradingApp store which allows for additional add-ons for traders to choose from and that TradeStation has a 99.9999% uptime which gives investors confidence that its platform will not break down during trading hours.

Negative TradeStation reviews mention that there are no fractional shares available, a $2,000 account minimum, and account fees that include a $50 inactivity account fee if your account is not used to trade 5 times in a year, a $35 annual fee for having an IRA, a $50 fee for closing an IRA and an outgoing account transfer fee of $125.


TradeStation Allegations and Fines


There are 25 disclosures on FINRA Broker Check from 2003 to present. Some disclosures are in relation to minor errors made by TradeStation while others are more significant.

In 2005, TradeStation paid $175,000 in a court case for violations of Pennsylavia’s Unfair Trade Practices and Consumer Protection Law, for churning, and for failure to utilize fair asset allocation.

Churning is when a broker excessively buys and sells securities without the investor’s investing goals in mind in order to produce more commissions.

In 2007, TradeStation paid out $750,000 to FINRA for not reporting 23.5 million orders from on their trading platform for 5 years.

In 2008, TradeStation paid $70,000 for failing to report short interest positions to FINRA.

They paid more than one fine for not locating shares that they promised to a customer who was shorting securities.

In 2011, they paid out $200,00 for failing to supervise accounts for suspicious activity.


Is TradeStation Safe Conclusion


Considering TradeStation’s history, their registrations with the SEC, their memberships with FINRA and SIPC as well as their agreement with WedBush Securities, which is a major financial firm in the trading industry, it is safe to say that TradeStation is a safe and legitimate company.

They have had allegations in the past by FINRA and the SEC and as a result had to pay fines. We do not have sufficient information to decide whether this was wrongdoing by the company as a whole or by specific individuals at the company. Besides these 25 disclosures over the past 20 years, customers are satisfied with TradeStation and they still hold a high reputation in the financial industry.

Now that we know TradeStation is a safe and legit company let’s review their features.


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Investment Lineup


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For both taxable and tax-deferred trading, TradeStation offers self-directed services only. There is no investment advice or financial planning. Available tax structures include:

  • Trust
  • Individual
  • Joint
  • Corporation
  • IRA
  • Limited partnership
  • LLC

Whatever tax structure is chosen, the account will have access to a wide range of investment products. These include:

  • Stocks
  • Funds (closed-end, mutual, and exchange-traded)
  • Options
  • Futures and options on futures
  • Bonds

Besides U.S. residents, TradeStation accepts applications from residents of many other countries. They get to trade the same lineup of assets we have just seen. Besides the U.S. exchanges, TradeStation has a partnership with Interactive Brokers that opens up foreign exchanges (and more asset classes like forex) for both American and non-American customers.

Securities (but not other products) held at TradeStation are protected by SIPC up to the standard $500,000 limit. TradeStation has an excess SIPC policy through Lloyd’s of London that is good for $24.5 million per customer and $300 million in aggregate.


Minimums and Fees


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TradeStation has two pricing schedules: one for American residents and another one for foreign residents. U.S. residents pay nothing for online trades of stocks and ETFs, although there is a lot of fine print. Examples include:

- Stock must be priced above $1
- $25 for a broker-assisted trade
- 0.5¢ per share for shares above 10,000 in a trade and for directly-routed orders

Futures and options on futures are $1.50 per contract, per side, while options are a little cheaper—just $0.60 each. Treasury trades cost $50.

Non-U.S. residents have the same pricing schedule except that stocks, ETFs, and options have a base charge of $5. Neither group of investors has to make an opening deposit, although to access some of the trading platforms, which we’ll look at below, an account must be funded.

TradeStation does have a notorious $50 inactivity fee. It can be avoided, however, with a $2,000 account balance or an annual trade history of at least 5 transactions.

Real-time data at Level I is free for equities, futures and options on futures, indexes, and equity options. Other data packages could come with fees. These can range from $0 per month up to $131, depending on the bundle selected.


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Margin Trading


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As a high-powered broker, TradeStation of course offers margin accounts. It’s possible to open an account on a cash basis if desired. A margin account will be able to trade with leverage. Day traders get up to 4:1 leverage on many securities for both long and short positions, although some assets have higher initial and maintenance requirements. These stocks are posted on TradeStation’s website (look for the green link in the left-hand column for the symbol lists).

The margin schedule at TradeStation has just two tiers. The lower level is below $50,000 in borrowed money and costs 13.5% per year. Above that amount, but below $500,000, the cost is 12.5%. Above $500,000, the interest rate is negotiable.


Website


Tradestation Account Rating

TradeStation’s website isn’t the easiest platform in the world to use. The Accounts tab at the top of the site is a good place to manage an account. Here, it’s possible to view balances, gain/loss details, positions, and other important information.


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The site itself has no actual research or trading resources. For these functions, there is a blue button in the top-right corner to place a trade. There are three platforms under the button: securities, and futures options. Each platform requires a relevant account (securities, futures options).

The securities platform is available in both live and simulated modes. They have the same tools, which include:

- Vertical price ladder for quick trades
- Horizontal trade ticket for more advanced orders
- Full-screen charts with lots of gadgets
- Options window with many integrated spreads
- News articles from Benzinga


Mobile App


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TradeStation’s mobile app has been recently updated. It has a new layout but keeps most of the same tools. Horizontal charting, however, has been lost. The options, news, and ladder windows we saw on the website make appearances on every security’s profile. At the top of every profile are icons to add the asset to a watchlist or enroll it in alerts.


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The order ticket has the same advanced order types the horizontal ticket on the browser platform has. These include:

  • Bracket orders
  • Trailing stop
  • Limit
  • OCO (order cancels other)
  • OSO (order sends other)

Upcoming earnings releases are displayed under the Events tab, which is accessible on the Markets page. Unfortunately, the app doesn’t have mobile check deposit or live streaming of video news.


Desktop Program


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For the absolute best trading experience, there is TradeStation 10. This is the company’s flagship trading software, and it is on a very high level.

There are layouts, called workspaces, already integrated into the platform. Some examples we found include:

- Futures Trader
- Market Scanner
- Find a Trade Idea
- Day Trader


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It’s possible to edit a layout to custom-build it. Multiple charts can be displayed in a single layout, and a single chart can be blown up full-screen. Charts have many tools, like technical studies and drawing gadgets.

The Apps tab in the upper-left corner of the site contains lots of add-ons that make TradeStation 10 a professional-level experience. Examples include:

- Intraday short locate
- TSAlgos
- OptionStation Pro
- Walk-Forward Optimizer


Day and Swing Trading


Tradestation Account Rating

PDT Rule: Securities accounts must maintain at least $25,000.01 in account equity to day trade at TradeStation. Futures accounts do not have to follow this rule.

Level II quotes: Available on TradeStation 10.

Shorting: TradeStation customers can short securities and futures. The broker’s software has discrete buttons for sell short. The website has a list of easy-to-borrow securities and a threshold list of securities that are restricted for short selling. Both lists appear under the green symbol-lists link already mentioned.

Direct-access routing: TradeStation offers several routing choices, although as already mentioned, these trades do come with surcharges.

Routing fees and rebates: Maker-taker fees are no longer available at TradeStation on trades of securities.

Extended Hours: TradeStation clients can trade securities from 8 o’clock in the morning until 8 o’clock in the evening. Futures and digital currencies have much longer hours.


Banking Features


Tradestation Account Rating

One of TradeStation’s major weaknesses is a lack of cash-management tools. There are no bank accounts here, and no hybrid securities-bank accounts that are now common elsewhere in the industry. TradeStation’s website does have a user-friendly tool to transfer funds by ACH or wire.


Customer Support


Tradestation Account Rating

A good place to find customer service on a TradeStation account is under the Support tab that appears on the broker’s website. Here, we found phone numbers for a variety of departments to place trades (such as futures and securities) and an email form. Trade desks are generally available whenever markets are open. This means futures department can be reached 24 hours a day, while the securities department has mostly weekday hours.

For general account service, there is a service department that can be reached during the week from 8 o’clock in the morning, Florida time, until 5 o’clock in the afternoon. The website also has an online chat widget that is available during the same hours.


Other Services


Tradestation Account Rating

Initial Public Offerings: Available through a partnership with ClickIPO.

Fractional-share Trading: Not available.

DRIP Service: Not available, either.

Individual Retirement Accounts: TradeStation does offer IRAs. It has Roth, Traditional, SIMPLE, Rollover, and SEP accounts. There are futures IRAs that have some pretty steep fees. The broker’s securities IRAs come with a $35 annual fee and a $50 termination fee.

Periodic Mutual Fund Purchases: Not possible.


Our Recommendations


Mutual Fund Investors: TradeStation offers no search engine to find mutual funds, although they can be traded on the website (with a $14.95 transaction fee). We would head to Firstrade instead and use its search wizard and pay no transaction fees.

Beginners: TradeStation is designed for experienced traders. Beginning investors should open an account with Robinhood.

Active Stock and ETF Trading: TradeStation is an excellent broker-dealer for the frequent trading of equities, especially with its desktop platform.

Long-Term Investors and Retirement Savers: Although TradeStation does have IRAs and lifecycle mutual funds, it doesn’t have much else in terms of long-term financial planning. Charles Schwab, by comparison, has investment advisors, retirement calculators, and much more.

Small Accounts: Because of TradeStation’s inactivity fee, we don’t recommend it for small investors. Webull has no such fee.


Tradestation Review Summary


Although TradeStation excels in some areas, it stumbles in many others. Experienced traders can do well here, though.


Open TradeStation Account


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Updated on 2/16/2024.


About the Author
Daniel Colantonio is a writer and entrepreneur from Long Island, New York. He has an IT and real estate background and he enjoys traveling, exercising and spending time with his family in his free time.