US20030200169A1 - Automatic stock trading system - Google Patents

Abstract

The present invention relates to a system for automatically trading real investment items desirably on at least one trading exchange based on predetermined conditions. The present invention includes a data interface for receiving investment data identifying at least one item capable of being traded and containing information uniquely associated with the item. An individual trading computer receives predetermined trading criteria for making a trade. The individual trading computer receives the investment data and the predetermined trading criteria. The individual trading computer then analyzes the investment data with the trading criteria and outputs a trade request signal desirably with no manual intervention in response to the analysis determining that the item should be traded. The trade request signal identifies at least one trade of the item to be made by a trader and authorizes the trader to make the trade identified in the trade request so that at least a portion of the trade identified in the trade request signal can be consummated.

Description

CROSS REFERENCE TO RELATED APPLICATIONS
• This patent application is a continuation of U.S. Ser. No. 09/451,643, filed on Nov. 30, 1999, which is a continuation-in-part of U.S. Ser. No. 08/970,769, now abandoned. The entire disclosures of U.S. Ser. Nos. 09/451,643 and 08/970,769 are hereby incorporated herein by reference.[0001]
STATEMENT REGARDING FEDERALLY SPONSORED RESEARCH OR DEVELOPMENT
• Not Applicable.[0002]
BACKGROUND OF THE INVENTION
• The trading of investment items, such as stocks and bonds is well known in the art. To aid investors, there are a number of data sources available for providing investment data to the investor. Also, there are a number of on-line investment trading systems today in which a trade request can be sent via a computer to a trader, and a traded product confirmation can be transmitted back from the trader to the computer. For example, one such system is offered by the Charles Schwab Company. Further, there are many commercially available investment item analysis programs or algorithms which analyze investment items including stocks, options, metals, and commodities.[0003]
• However, to Applicant's knowledge, a system for automatically executing a trade by receiving investment data and analyzing such investment data with predetermined trading criteria and then sending a trade request to a trader and/or an exchange is not currently available. It is to such a system for automatically executing trades that the present invention is directed.[0004]
SUMMARY OF THE INVENTION
• The present invention relates to a system for automatically trading investment items based on predetermined conditions. The investment items could be stocks, options, contracts, metals, and/or a number of other investment items, for example.[0005]
• The system includes a data interface for receiving investment data identifying at least one item capable of being traded and containing information uniquely associated with the item. An individual trading computer receives predetermined trading criteria for making a trade, and the investment data. The individual trading computer then analyzes the investment data with the predetermined trading criteria and automatically outputs a trade request signal in response to the analysis determining that the item should be traded. The trade request signal identifies at least one trade of an item to be made by a trader and authorizes the trader to make the trade identified in the trade request so that at least a portion of the trade identified in the trade request signal is capable of being consummated. Thus, the present invention provides a fully automated investment trading system in which an entity such as a person or computer can input investment data and predetermined trading criteria into the system and then leave the system unattended to trade real investment items for extended periods of time such as hours, days or weeks.[0006]
• The present invention solves at least three problems of manual trading. The first problem relates to discipline. That is, for psychological reasons the requirement for matching the exact criteria for a trade is overwhelming difficult when trading manually. Automatic trading eliminates this difficulty. The second problem is human error. That is, it is preferable that a close watch of market data for a number of indications be exactly maintained. However, factors such as boredom, interruptions, misreadings, etc. lead to poor or losing trade executions. The third problem relates to the fact that market conditions gradually change and require criteria or algorithm methodology alterations. This difficulty is virtually impossible to detect when trading manually. The present invention permits the individual trading computer to maintain a close watch on market data by the data interface periodically receiving investment data. The individual trading computer can analyze the investment data with the predetermined trade criteria and then send a trade request signal to a trader in response to the analysis determining that one or more items should be traded to overcome the before mentioned problems of manual trading.[0007]
• Thus, it is believed that the present invention represents an advance in the state of the art relating to investment systems. Other objects, features and advantages of the present invention will become apparent to those of ordinary skill in the art upon a reading of specification in conjunction with the attached drawings and appended claims.[0008]
BRIEF DESCRIPTION OF THE SEVERAL VIEWS OF THE DRAWINGS
• FIG. 1 is a schematic, diagrammatic view of a system for automatically trading investment items operating in accordance with the present invention.[0009]
• FIG. 2 is a schematic, diagrammatic view of a data interface adapted to operate in accordance with the system depicted in FIG. 1.[0010]
• FIG. 3 is a schematic, diagrammatic view of an automatic individual trading computer adapted to function in the system depicted in FIG. 1.[0011]
• FIG. 4 is a schematic, diagrammatic view of a trading interface adapted to operate in the system depicted in FIG. 1.[0012]
• FIG. 5 is a price/share chart of a stock for XYZ company to illustrate the individual trading computer being programmed with a moving stop loss in accordance with the present invention.[0013]
DETAILED DESCRIPTION OF THE INVENTION
• Referring now to the drawings, and more particularly to FIG. 1, shown therein and designated by the[0014]general reference numeral10 is an automated investment trading system constructed in accordance with the present invention. The automatedinvestment trading system10 basically comprises adata interface12, aninput unit14, anindividual trading computer16, and atrading interface18.
• The[0015]individual trading computer16 is an open architecture system which is designed to be publicly available and utilized by individual investors to automatically manage the individual's portfolio (e.g. place buy and sell orders of real investment items such as stocks or bonds) based on predetermined criterion entered into theindividual trading computer16 by an individual via theinput unit14.
• The[0016]data interface12 is capable of interfacing either simultaneously or not simultaneously with a plurality of individual selecteddata sources20, only one of which is shown in FIG. 1 for purposes of clarity. Thedata interface12 receives investment data identifying at least one real item capable of being traded and containing information uniquely associated with such item from the individual selected data source(s)20 via acommunication link22. The investment data can be recent or historical stock or investment item price data, company financial data, commodity price data, interest rate data, consumer price index data, or any other data relevant to the evaluation of investing in the item. The item can be stocks, bonds, contracts, options, metals, real estate, or any other type of tangible or intangible property which can be bought or sold and/or otherwise invested in by an entity, such as an individual. The individual selected data source(s)20 is selected by the individual manipulating theindividual trading computer16 from a plurality of data sources, such as Charles Schwab, Data Broadcast Company, an investment item exchange, a data base, or any other suitable source of investment data. Thecommunication link22 can be cable communications, air way communications or any other suitable transmission link.
• The investment data is transmitted from the[0017]data interface12 to theindividual trading computer16 via acommunication link24. Theindividual trading computer16 receives the investment data transmitted by thedata interface12. Theindividual trading computer16 also receives predetermined trading criteria for making a trade from theinput unit14 via acommunication link26.
• The predetermined trading criteria includes instructions, such as buy and sell orders, or algorithms capable of being used to analyze investment data to generate a trade request to buy and/or sell one or multiples of an investment item or products. For example, the predetermined trading criteria can be an instruction to buy and/or sell a stock at a predetermined price. In addition, multiple instructions (predetermined trading criterion) can be entered into the[0018]individual trading computer16 to form a trading sequence relating to the same or different investment items. For example, a predetermined trading criteria to buy 100 shares of a stock at $50.00 and another predetermined trading criteria to subsequently sell the 100 shares of the same stock at $55.00 can be entered into theindividual trading computer16 before the predetermined trading criteria to buy the 100 shares of stock at $50.00 has been executed. The predetermined trading criterion can then be sequentially executed if the stock's market price drops to $50.00 and then rises from $50.00 to $55.00. The algorithm can be any algorithm and/or program capable of analyzing investment data to produce the trade request, such as a commercially available investment algorithm.
• The[0019]input unit14 can be a keyboard, a modem, a disk drive, or any other device capable of supplying predetermined trading criteria to theindividual trading computer16. Theinput unit14 can be located in close proximity to theindividual trading computer16.
• After the[0020]individual trading computer16 receives the investment data, and the predetermined trading criteria or criterion, theindividual trading computer16 automatically analyzes the investment data with at least one of the predetermined trading criteria. In response thereto, theindividual trading computer16 generates the trade request and automatically outputs a trade request signal to an individual selectedmarket trader28 with no manual intervention in response to the analysis determining that the item should be traded. The trade request signal identifies at least one trade of an item to be made by the individual selectedmarket trader28 and authorizes the individual selectedmarket trader28 to make the trade identified in the trade request signal via acommunication link30. The trade request typically identifies at least one investment item and includes a product quantity and a predetermined trade price or market order conditioned to specifically identify all predetermined parameters or conditions necessary (such as long or short positions) to authorize the individual selectedmarket trader28 to make the trade identified in the trade request signal.
• The[0021]trading interface18 receives the trade request signal output by theindividual trading computer16. In response thereto, thetrading interface18 formats the trade request signal to a format understandable by the individual selectedmarket trader28 and then outputs the formatted trade request signal to the individual selectedmarket trader28 via acommunication link32. Thecommunication link32 can be a cable and/or air wave communications and/or any other suitable transmission link.
• The individual selected[0022]market trader28 receives the formatted trade request signal and in response thereto, the individual selectedmarket trader28 executes at least a portion of the trade. The individual selectedmarket trader28 is separate and apart from theindividual trading computer16. The individual selectedmarket trader28 can be anyone or anything that causes at least a portion of the trade to be consummated desirably on at least one trade exchange. The individual selectedmarket trader28 is selected by the individual from a plurality of potential traders, which may be Internet traders such as E-trade, Ameri-trade, Instinet, or Charles Schwab. The individual selectedmarket trader28 can be a company, an individual and/or a securities market, such as the New York Stock Exchange, the Pacific Stock Exchange, the Midwest Stock Exchange, the NASDAQ Stock Exchange, the over the counter market, the futures market, and/or the commodities market, for example.
• Once the individual selected[0023]market trader28 has executed the trade request signal, either partially or in whole, the individual selectedmarket trader28 outputs a trade confirmation signal to thetrading interface18 via thecommunication link32. Thetrading interface18 receives the trade confirmation signal output by the individual selectedmarket trader28, and in response thereto, thetrading interface18 outputs the trade confirmation signal to theindividual trading computer16 via acommunication link34. Theindividual trading computer16 receives the trade confirmation signal transmitted by thetrading interface18, and in response thereto, theindividual trading computer16 may modify the predetermined trading criteria in a predetermined manner. For example, if the trade confirmation only showed that 25% of the investment items included in the trade request signal had been traded, then theindividual trading computer16 may decrease the number of investment items to be traded in the predetermined criteria by a predetermined amount of about 25%.
• Moreover, when more than one predetermined trading criteria have been entered into the[0024]individual trading computer16 for the same investment item and the predetermined trading criterion are indicated to be executed in a predetermined order, the trade confirmation signal indicating that one of the predetermined trading criteria has been executed will automatically activate the monitoring of the other predetermined trading criterion by theindividual trading computer16. For example, a predetermined trading criteria to buy 100 shares of a stock at $50.00 and another predetermined trading criteria to subsequently sell the 100 shares of the same stock at $55.00 can be entered into theindividual trading computer16 before the order to buy the 100 shares of stock at $50.00 has been executed. Once the trade confirmation signal indicates that the 100 shares of stock have been bought, theindividual trading computer16 is activated to monitor in real time the price of the stock so that the predetermined trading criteria to sell the stock at $55.00 can be automatically executed if the stock's market price rises to $55.00.
• The data interface[0025]12 is shown in more detail in FIG. 2. The data interface12 basically comprises an investment item data receiver andstorage unit40 which receives signals from aninterface unit42 via acommunication link44. The investment item data receiver andstorage unit40 can be a model M1365117T obtainable from Data Broadcast Corporation. Theinterface unit42 can be a receiver antenna and the data source(s)20 can be a local radio station which receives real time investment item quotes from a satellite station (not shown) sent from an investment item exchange, for example. In one embodiment, the investment item data receiver andstorage unit40 can receive real time investment item data on all investment items listed at investment item trading exchanges all over the world, but the investment item data receiver andstorage unit40 only stores the data from predetermined investment item provided to the investment item data receiver andstorage unit40 from theindividual trading computer16. The investment item data receiver andstorage unit40 transmit the stored investment data identifying at least one investment item capable of being traded and containing information uniquely associated with such investment item to theindividual trading computer16 via thecommunication link24 when a request for a stored data signal is sent to the investment item data receiver andstorage unit40 from theindividual trading computer16. The request for data signal is typically sent four to ten times a minute from theindividual trading computer16 and the investment item data stored in the investment item data receiver andstorage unit40 is usually updated at a frequency of about five to twenty times per minute from the data source(s)20.
• The[0026]individual trading computer16 is shown in more detail in FIG. 3. Theindividual trading computer16 includes acomputer46 which receives investment data from a databroadcast interface unit48 via acommunication link50 and the predetermined trading criteria from theinput unit14 via thecommunication link26. Thecomputer46 can be a personal computer, such as Packard Bell model 2010 or a Macintosh obtainable from Apple Computer or a personal data assistant. The databroadcast interface unit48 can be software obtainable from Data Broadcast Corporation which is running on thecomputer46. Thecomputer46 is programmed to analyze the investment item data with the predetermined trading criteria to generate the trade requests, as discussed above with reference to FIG. 1. In addition, thecomputer46 is programmed to determine the value of an investment item portfolio owned by the individual and stored by thecomputer46 of theindividual trading computer16 in real time (every investment item data retrieval cycle). The investment item portfolio can include information regarding investment items which are maintained in several different investment item accounts. For example, the individual may have accounts with several different individual selectedmarket traders28, such as E-Trade, Charles Schwab and Ameri-trade. Theindividual trading computer16 can then automatically determine the amount of gain or loss of the investment item portfolio based on the latest trade confirmation data received by thecomputer46 over the communication link34.The results of these computations can be used as part of the predetermined trading criteria supplied by theinput unit14.
• Moreover, the[0027]individual trading computer16 is capable of obtaining information from more than one individual selected data source(s)20, and outputting trade request signals to more than one individual selectedmarket trader28. The determination of which individual selectedmarket trader28 theindividual trading computer16 transmits the trade request signal to can be made by the individual and input as part of the predetermined trading criterion, or be automatically made by thecomputer46 based on predetermined criterion stored therein, such as the differences in fee schedules between the individual selectedmarket traders28. Theindividual trading computer16 can be programmed to select the individual selectedmarket trader28 so as to minimize the costs of submitting the trade request signal (i.e. buying or selling investment items). Theindividual trading computer16 maintains all of the information regarding the individual's investment item portfolio, the predetermined trading criterion, the identity of the individual selected data source(s)20, and the identity of the individual selected market trader(s)28 private.
• Referring now to FIG. 4, the[0028]trading interface18 is shown in more detail. Thetrading interface18 basically includes acomputer52 which communicates with ainterface unit54 via acommunication link56. Thecomputer52 can be a Packard Bell model2010, and theinterface unit54 can be a modem. Thecomputer52 can be programmed with a trading exchange program, such as “street smart” obtainable from the Charles Schwab Company to receive trade requests and then output such trade requests to the individual selectedmarket trader28.
• The present invention also contemplates the[0029]individual trading computer16 monitoring the prices of each of the investment items contained in the investment item portfolio owned by the individual and stored by theindividual trading computer16. Theinput unit14 receives predetermined trading criteria including a predetermined stop loss value for the item from the individual. The predetermined stop loss value can be a predetermined amount, e.g. $5/share, or a percentage of the value of the item.
• The data interface[0030]12 periodically receives pricing data from the individual selecteddata source20 selected by the individual. The pricing data identifies at least one item capable of being traded and contains a price information uniquely associated with the item.
• The[0031]computer46, which is in communication with thedata interface12 and theinput unit14, has a reference to the item stored thereon. Thecomputer46 automatically monitors, in real time, the price of the item via the pricing data and changes an execution price of the moving stop loss in a first direction as the price of the item changes in the first direction and maintains the execution price of the moving stop loss as the price of the item changes in a second direction opposite from the first direction.
• The[0032]computer46 automatically outputs, in real time, a trade request signal to the individual selectedmarket trader28 selected by the individual in response to the price of the item changing in the second direction to the execution price of the moving stop loss. The trade request signal identifies at least one trade of the item to be made by the individual selectedmarket trader28 and authorizes the individual selectedmarket trader28 to make the trade identified in the trade request signal whereby at least a portion of the trade identified in the trade request signal is capable of being consummated.
• For example, a price/share chart of a stock for XYZ company (hereinafter referred to as “XYZ stock”) is shown in FIG. 5. Assuming that the XYZ stock was bought at $100/share, and the predetermined stop loss value was $5/share, the execution price of the moving stop loss would be initially set at $95/share. If during a first period, the price of the XYZ stock decreases to $98/share, then the execution price of the moving stop loss is maintained, and the moving stop loss would not be activated. If the price/share of the XYZ stock increased from $98/share to $120/share, the execution price of the moving stop loss would be increased in real time to $115/share. If the price/share of the XYZ stock decreased from the peak shown in FIG. 5 ($120/share) to $115/share, the moving stop loss would activate the[0033]individual trading computer16 to output a trade request signal to sell all or a preselected part of the XYZ stock.
• It should be noted that the[0034]computer46 of theindividual trading computer16, and thecomputer52 of thetrading interface18 can be the same physical computer. In this embodiment, programs embodying the logic of theindividual trading computer16, and thetrading interface18 can be programmed onto the same computer. The trade request may then be forwarded from the individual trading computer logic to the trading interface logic via a macro program. The macro program may include a trade confirmation loop which waits and captures the quantity and price of any investment item which has been traded (the trade confirmation signal) and to forward such trade confirmation signal to the individual trading computer logic via thecommunication link34. It should be understood by those of ordinary skill in the art that in this embodiment, the communication links30 and34 would exist as logical links between the two computer programs.
• Changes may be made in the construction and the operation of the various components, elements and assemblies described herein and changes may be made in the steps or the sequence of steps of the methods described herein without departing from the spirit and scope of the invention as defined in the following claims.[0035]

Claims (6)

What is claimed is:

1. An individual trading computer for automatically trading investment items, the individual trading computer comprising:

an input unit receiving predetermined trading criteria from an individual for making a trade;

a data interface receiving investment data from a data source selected by the individual, the investment data identifying at least one item capable of being traded and containing information uniquely associated with the item for making a trade;

a computer in communication with the data interface and the input unit, the computer receiving information selecting a market trader, and automatically analyzing the investment data with the predetermined trading criteria and automatically outputting a trade request signal to the market trader in response to the analysis determining that the item should be traded, the trade request signal identifying at least one trade of the item to be made by the market trader and authorizing the market trader to make the trade identified in the trade request signal whereby at least a portion of the trade identified in the trade request signal is capable of being consummated.

2. The individual trading computer ofclaim 1, wherein the predetermined trading criteria are stored in the computer, the predetermined trading criteria including multiple instructions to form a trading sequence relating to the same investment item.

3. The individual trading computer ofclaim 1, wherein the input unit, data interface and computer are all provided as components on a single physical computer.

4. The individual trading computer ofclaim 1, wherein the computer outputs trade request signals to more than one individual selected market trader, and an investment item portfolio is stored on the computer, the investment item portfolio including a first investment item maintained in an account by one individual selected market trader, and a second investment item maintained in an account by another individual selected market trader.

5. The individual trading computer ofclaim 4, wherein the investment item portfolio stored on the computer is maintained confidentially.

6. A method for automatically trading investment items based on predetermined conditions, comprising:

receiving an individual's selection of at least one individual selected data source;

receiving investment data identifying at least one item capable of being traded and containing information uniquely associated with the item from the individual selected data source;

receiving predetermined trading criteria for making a trade;

receiving the individual's selection of an individual selected market trader;

analyzing the investment data with the predetermined trading criteria;

outputting, automatically, a trade request signal to the individual selected market trader in response to the analysis determining that the item should be traded, the trade request signal identifying at least one trade of the item to be made by the individual selected market trader and authorizing the trader to make the trade identified in the trade request signal whereby at least a portion of the trade identified in the trade request signal is capable of being consummated.

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