TradeStation: Don't Trade it From Your Portfolio

While market volatility is bad news for many companies, it is good news for TradeStation Group, Inc. (TRAD), because it means heavy trading volume.

TradeStation is an online brokerage, and when people use its services to make trades, TRAD earns commissions. Its software is best-in-class and primarily caters to the savvy investor who buys and sells quickly. Traders use TRAD's software to evaluate data and create intricate strategies, allowing them to automate rules they've established. They then can trade through TRAD's brokerage arm on a diverse group of assets, including stocks, options, and futures.The average user of TRAD makes more than 500 trades a year. However, as analysts have pointed out, its growth of new accounts has slowed, leading some to question if it can continue to be profitable in the years ahead. But TradeStation's software is far ahead of its competitors, and it is proprietary. The traders who use TRAD are sophisticated in their knowledge of the markets and rely on TradeStation's advanced software to help them make money. I can't imagine that TRAD is going to lose customers to other online brokerages.

As the volatility of the economy shows no sign of calming down, the number of trades we will see in the short-term by this type of fast trader will remain high, which will help TradeStation's profitability in the upcoming year. Its recent third quarter results showed that trading commissions were up 42% from last year, same period. Further, TRAD is financially healthy, with strong cash flow and no debt. I wouldn't trade this stock for that of its online trading competitors!

Type of Stock: An online brokerage that allows subscribers to use its best-in-class proprietary software to create rules-based strategies, and make automated trades.

Price Target: Trading at $11.42, this stock isn't without its risks. But the market isn't going to settle down anytime soon, and all of this volatility is good for TRAD. A recent Goldman Sachs report thinks this is a good pick, and puts a price target of $13.50 on it. I'm even more confident -- I think we could see this stock rise to $15 in the next 12 months.