How TradeStation Processes Strategies Online Seminar

The Leader in Rule-Based Trading™

Important Information and Disclaimer: TradeStation Securities, Inc. seeks to serve institutional and active traders. Please be advised that active trading is generally not appropriate for someone of limited resources, limited investment or trading experience, or low risk tolerance, or who is not willing to risk at least $50,000 of capital. This presentation discusses in detail how TradeStation is designed to help you develop, test and implement trading strategies. However, TradeStation Securities does not provide or suggest trading strategies. We offer you unique tools to help you design your own strategies and look at how they could have performed in the past. While we believe this is very valuable information, we caution you that simulated past performance of a trading strategy is no guarantee of its future performance or success. We also do not recommend or solicit the purchase or sale of any particular securities or securities derivative products. Any securities symbols referenced are used only for the purposes of the demonstration, as an example ---- not a recommendation. Finally, this presentation shall discuss automated electronic order placement and execution. Please note that even though TradeStation has been designed to automate your trading strategies and deliver timely order placement, routing and execution, these things, as well as access to the system itself, may at times be delayed or even fail due to market volatility, quote delays, system and software errors, Internet traffic, outages and other factors. All proprietary technology in TradeStation is owned by TradeStation Technologies, Inc., an affiliate of TradeStation Securities, Inc. The order execution services accessible from within TradeStation are provided by TradeStation Securities, Inc. pursuant to a technology license from its affiliate and its authority as a registered broker-dealer and introducing broker. All other features and functions of TradeStation are provided directly by TradeStation Technologies. TradeStation® and EasyLanguage® are registered trademarks of TradeStation Technologies, Inc. "TradeStation," as used in this document, should be understood in the foregoing context. Copyright © 2002-2006 TradeStation Technologies, Inc. All rights reserved. Licensed to its affiliate, TradeStation Securities, Inc. Member NASD, NYSE, SIPC & NFA.

Order Actions Buy: establish, or add to, a long position (any existing short positions will be covered before the long position is established). Sell: sell to liquidate long positions only. SellShort: establish, or add to, a short position (any existing long positions will be liquidated before the short position is established). BuyToCover: buy to cover short positions only.

When is a Strategy Evaluated? By default… Strategies are evaluated at the close of each bar. All Orders have a 1 bar duration. No multiple entries. (One entry in one direction at a time.)

Order Types Market orders ‘filled’ on the open of the next bar Stop orders ‘filled’ on the next bar if stop price is touched Limit orders ‘filled’ on the next bar if limit price is touched

When a Strategy is Applied to a Chart 1. The trades are reconstructed on the historical data (back-testing). 2. New real-time data is monitored for new trades. 3. If automation is enabled, orders are sent to the marketplace for actual execution.

When a Strategy is Applied to a Chart Historic Reconstruction (Back-testing) Assumption #1 – Trade sequence 2

3 4

1 4 3

1 2

When a Strategy is Applied to a Chart Historic Reconstruction (Back-testing) Assumption #2 A trade occurred at each price on the bar. Assumption #3 Limits and stops are assumed filled at their limit and stop prices as soon as those prices are touched.

When a Strategy is Applied to a Chart Real-Time Monitoring As new real-time data is received, it is seen by the strategy in tick-by-tick sequence. Assumptions #1 and #2 do not apply. Only Assumption #3 is applicable to this new, real-time data.

When a Strategy is Applied to a Chart Strategy Automation Two ‘levels’ of Strategy Automation: • Track hypothetical positions and orders • Automate execution – Orders are sent to the market, with confirmation On or Off – TradeStation will begin entering orders after it has checked to see if your actual position matches the strategy position.

Formatting Strategies Calculation tab Intrabar Order Generation Strategy is evaluated on every tick. All Orders have a 1 tick duration.

Strategy Properties General tab • • • •

Costs and Capitalization Position Limits Trade Size Back-testing Resolution

Automation Tab