A Brief History of Trading and the Trading Stocks

• Posted by Greg Harmon
• on February 26th, 2015

It used to be that you worked at a company and got a pension. That was a recurring payment when you retired based on the number of years you worked at a company and your salary. Retirement was easy. Work until 65, retire, and get checks. Cash only, no stocks. Life was great, no wonder everyone drank at work all day long. Your father or grandfather might be able to tell you about it.

Then we moved into the age of job movement, and pressure started to build to be able to live out a retirement even if you did not have 30 years working at the same company. There is more to this piece, but it led to the development of the cash balance plan. Your company now would fund that retirement by giving you a smaller piece of income every year in an account you could not access.

This was a great idea to force companies to be able to afford to pay benefits and not just go bankrupt or run out of money. It also opened the door wider to employees leaving a job as they could take this account with them. The birth of the IRA. It did not take long for employees to figure out that the place to keep their IRA needed to be safe. The big brokers were winners.

Along the way there was this tech start up phase in the 90’s. This is important to the story as it led to companies that made no money paying employees with company stock instead of money. A far cheaper way to operate. They compensated for a lack of cash by bringing in ping pong tables for the employees. Some of these companies actually worked out and those employees now also had stock and stock options. What were they to do? The answer came from academia – Diversify.

And the only way to diversify when you own pantloads of stock and options in one company is to sell it and buy other stuff. Stock brokers became a necessity. First only the big ones like Goldman Sachs and Morgan Stanley. But then as the rest of Americans decided they wanted to put their $25 into the markets the smaller ones developed. This was a pain in the rear end for Goldman. As you can imagine these clients were never going to invite them to play golf at Augusta or even buy them a beer. So they were happy to have the likes of Fidelity, Charles Schwab, eTrade, Interactive Brokers, Ameritrade and others take these $25 accounts.

But Goldman failed to see two things: people believed they could invest better than the professionals and people are willing to go broke mortgaging their home and lifestyles to be able to prove this. So the likes of TD Ameritrade and Interactive Brokers grew quickly. I may have missed a few steps, but hey this is a blog not Forbes magazine.

That brings us to today. With everyone you know trading stocks everyday there is a constant search for ideas. And two that show up today to add another layer to this saga are the aforementioned TD Ameritrade and Interactive Brokers. lets take a look.

TD Ameritrade ($AMTD) has moved in a wide range through mos of 2014. But there is some clarity in that madness. The price action traced out a harmonic Shark pattern that completed in December and then retraced 50% of the pattern. Since then it has moved back up to the top of the pattern, resistance. A move over that level at 37 and this stock has a target of 39 to the upside. But this also puts the price into territory it has never seen at all-time highs, a recipe for more growth.

Interactive Brokers ($IBKR) also has some upside promise. The chart above show the stock has rising off of a pullback in January to a consolidation zone. A small step higher and more consolidation. The 20 day SMA has now caught up to the price. Several times previously this has led to a move higher in the stock price. Should it happen again then the price would break the consolidation zone and be free to continue towards the target of 36 above.

If only you had seen this progression when it was first evolving in the 1960’s. But at least you still have time for this latest evolution.

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