Tradestation is an internet brokerage firm that provides software for online stock market investing. It has been in business for more than twenty-five years. Today, this company is among the most popular choices for many active investors because it allows them to invest without paying commissions on stocks, securities, and futures.
We’re here to answer the question “How does Tradestation make money?” so let’s start by taking a look at their business model.
Tradestation offers its services under a SaaS model. It makes money by charging subscription fees, which allows clients to access the service without paying any additional charges. Additionally, it earns revenue from trading fees charged when using the service’s proprietary software.
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Tradestation is a stock market trading site where investors can buy and sell shares of companies without paying any commissions. It makes its revenue by offering other financial products and services.
It has tons of features that allow you to trade with ease.
Business Model of Tradestation
As a trading platform for online stock market traders, Tradestation offers a SaaS business strategy and also fits into the category of FinTech. Tradestation’s 99.999% uptimes stand out from their competition which includes:
- Fidelity Investments
- Raymond James
On its website, Tradestation provides stock market analysis tools for both subscription and non-subscription users. Both types of users can use these tools to trade stocks, options, IPOs, futures, etc.
- Web Trading
- Mobile Apps
- Simulated Trading
Investopedia claims Tradestation has many appealing benefits:
- TradeStation provides an extremely stable and reliable trading environment with 99.999% uptime.
- Trad Station’s platform has excellent chart rendering, technical analytics, backtesting, order execution, and trade automation technology
- The TradingApp store offers a wide variety of third-party add-on tools, including technical indicators, trading strategies, and order management software.
- You don’t need an account to use TS GO
- You get up to 2% cash back when trading stocks, ETFs, futures, futures contracts, cryptocurrencies, and crypto assets through Robinhood.
- Trading Station is designed for active, technical traders, but its new products and offerings make it appealing to less experienced traders and even casual day traders.
Tradestation has been operating since 1978, so most serious investors already knew about them. Thanks to their new ownership by Monex Group Inc. they now have a global reach.
Tradestation has all the costs associated with running a software company and a financial technology company.
Like any SaaS and financial technology company, Tradestation needs to spend money on technical skills, its employees’ salaries, and the upkeep of its equipment.
We can also anticipate other SaaS-related costs for Tradestation including:
- Payroll for development
FinTech-specific expenses may include:
- Market research
- Trading technology
- Licensing and fees
- Business consultants or freelancers
- One-off legal contracts
- Office space rental
- Website maintenance
- Domain fees
- Office Supplies
- Recurring legal fees
- Accountant fees
After its acquisition by Monex Group Inc. (NYSE: MNX), Tradestation was able to expand into new markets, including Europe and Asia.
How Does Tradestation Make Money?
Tradestation is an online trading platform for all kinds of securities. You can use it to trade stocks, bonds, futures contracts, options, ETFs, and so on. And when you buy one of these products through Tradestation, you get paid by them every month.
Trading commissions are another source of income.
Trading on Tradestation requires a monthly subscription fee.
- Amateur traders $99/month
- Professional traders $100/month
On Tradestation’s Products page, they list the different types of securities that can be traded there: Stocks, Options, IPOs, Futures, etc.
Most stockbrokers offer their clients access to all of the big exchanges, including Nasdaq, Nasdaq OMX, NYSE, New York Stock Exchange Amex, NYSE Arca (Arca), BATS, Bats Y, EDGX and EDGA, OTCBB and Pink Sheet companies.
You may place any type of order including market, stop loss, and take profit. If you’re not paying for the service, you’re required to maintain at least $2,000 in your account.
Tradestation members have the opportunity to trade ETFs without paying any fees.
For those who don’t know, ETFs are essentially bundles of different types of assets including stocks, commodities, cryptocurrencies, mixed investment portfolios, etc. They’re traded just like regular stock indexes but without any fees charged by brokerage firms.
Tradestation users can buy stocks without paying commissions. The appeal of IPO is that by investing in a company before it goes publicly traded, investors can get in early if the stock is promising.
If you’re an investor, having access to a good IPO trading platform gives you the chance to study a company before it’s going public and purchase shares at a lower price before the market opens on the first day.
Tradestation doesn’t list its own products on its website, but they do offer quotes, major trading currency, and forex pairs.
Forex is an international market where people buy and sell currencies.
Contract Fees and Commissions
There are some fees associated with trading at Tradestation. These include options, futures, mutual funds, bonds, and cryptocurrency fees.
Similar to most major brokerage houses, Tradestation allows its clients to trade equity securities through an electronic platform. However, unlike stock trades, options contracts do not allow for free transactions. Instead, Tradestation charges a $0.01 transaction charge per option contract.
An option contract is a contract to buy (or) to sale a stock, bond, ETF, mutual fund, currency, cryptocurrency, or commodity for a specific price, called the “option” or “exercise price”, by a specified time, called the “expiration”.
There are two main types of options contracts: calls and puts. Options contracts can be subdivided into two groups: calls and puts.
In a put option, the buyer of the option anticipates an increase in the value of the underlying asset. Therefore, he buys a contract that allows him to sell the asset at a fixed price (the “put” price) prior to the expiry date. If the asset increases in value during the life of the contract, the seller receives the difference between the current market price and the put price. On the other hand, if the asset decreases in value, the seller pays the difference between the current price and the put price back to the buyer.
A call option gives the owner the right to purchase an underlying security at a fixed rate (the “call” part) within a certain period of time (the “expiration date”). The owner can exercise his/her rights at any time before expiration but must pay the full amount of the option if he/she exercises after expiration. Conversely, a puts option gives the owner the obligation to sell the underlying security at a fixed exchange rate (the “purchase” part) during the same period of time. The owner may not exercise the option if he/she has not paid the full amount of the premium.
Tradestation charges a fee of $1 per contract, per side, and $0.50 per contract, per side for micro-future.
Futures are also known as contracts, usually for stocks (or shares), indexes, and commodity futures, which allow investors to buy an asset at a certain price on a future date. They’ve traded in a way similar to trading in stock option contracts.
The main difference between a futures contract and an alternatives contracts is that an alternative contract is optional. If an alternative contracts holder chooses not to complete the contracts, they lose their investment in the alternative. On the other hand, a futures contract is “in writing” and the contracts must be performed.
With over 300 futures and futures options contracts available, traders at Tradestation have access to an extensive list of financial instruments.
Tradestation allows its members to trade mutual funds for free. However, they charge a $14.95 trading commission per transaction.
Tradestation doesn’t list its own products on its site, but they do offer trading services for bonds. Their fees are $14.95 plus another $5 per bond traded.
Tradestation users don’t list cryptocurrency trading on their own websites, but they do allow them to be traded through their platform.
- Bitcoin (BTC), Ethereum (ETH), Litecoin, and Ripple (XRP).
The commissions that TradeStation charges are reasonable:
- For smaller amounts of capital, there’s no minimum trading fee. However, if you want to invest larger amounts of capital, there is a minimum trading fee of 0.3%.
The Big Merger
On June 10, 2012, Monex Group acquired Tradestation for approximately $402 million USD. As a result of this transaction, Tradestation became a wholly-own subsidiary of Monex Group.
Monex Group is an online securities brokerage that offers various other services as well.
- M&A advisory
- debt & equity underwriting
- Asset allocation focuses on alternative investments
- investment education
- other investment banking functions
To increase their global reach, they decided to launch Tradestation USA.
Conclusion: How Does Tradestation Make Money?
Tradestation is surely an excellent trading platform. It offers a top-notch trading platform that enables you to execute your trading strategy in the most convenient manner possible.
Advanced charting features are available through TradeStation. They’re compatible with many leading brokerages, so they’re easy to use.
Writing this detailed, comprehensive piece about Tradestation’s business model was definitely an adventure. We hope this piece gave you valuable insights into how we make money.
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