If you are a day trader, you undoubtedly have a strong concept of what you are looking for in a brokerage and online trading platform: minimal charges, quality research, unique strategy tools, and comprehensive trading software. However, would it be better if you use trading software related to your style of trading? Therefore, this article is conducted to make you understand more about it, including its exact meaning, types, and techniques for selecting it.
List of Contents
What Exactly is Trading Software?
Trading software is a set of computer programs used to trade and analyze financial assets such as currencies, stocks, bonds, and derivatives. It is used across a network with a financial intermediary such as a broker, market maker, or stock exchange. Moreover, it allows investors to place transactions from any area. It contrasts greatly with the conventional platform trading approach, which uses an open outcry mechanism to place orders.
Typically, brokerage companies allow their traders to use online trading software for free or at a cheaper rate if they keep a funded account. Importantly, traders may manage their accounts from any place using the software. Moreover, it can be opened from a desktop, mobile device, or web-based platform.
Besides, some trading software enable traders to acquire third-party software that enhances the capabilities of the brokerage company’s platform. Live market pricing, charting packages, news feeds, order placing, fundamental analysis, and technical analysis are all important components of it.
Types of Trading Software
Generally, trading software has a variety of types with functionality given by both brokerages and third-party developers as follows.
1. Technical Analysis
Most trading software contains interactive charting functions such as chart patterns including trend lines and shapes, as well as technical indicators.
2. Fundamental Analysis
Some trading software offers traders access to basic information like financial statements, analyst ratings, and other proprietary tools. Therefore, traders can easily use it.
3. Placing Trades
Most trading software supports the execution of trades, including market orders, limit orders, the retrieval of real-time quotations, as well as the viewing of the Level 2 order book. Furthermore, some of them will additionally track information such as win rate and average profit and loss on closed transactions.
4. Paper Trading
Some trading software has the option to do riskless with no-real money deals, known as paper trading. Traders may put their talents to the test to determine how they would do before investing actual funds. Importantly, this function is extremely popular among forex brokers.
5. Programmatic Trading
Using advanced trading software, traders may create trading systems that can be executed automatically rather than manually clicking a button. Furthermore, these software solutions may include backtesting capabilities that allow traders to assess how their automated trading systems might have fared in the past.
How to Select Trading Software
Normally, traders and investors should carefully assess the characteristics they want before selecting trading software. Significantly, active traders that rely on automated trading systems may select the one that is quite different from an investor who is merely seeking for the capacity to place trades.
Besides, most brokers and software providers enable prospective traders to try their product before purchasing it or opening an account with them. Thus, you should take advantage of this by experimenting with various pieces of software. Moreover, you have to determine which tools and features you prefer and use. Then consider the benefits and drawbacks of the broker and their commissions.
Nevertheless, if you prefer a certain broker because of their low-fee structure, but not their software, you may be able to discover third-party software that you can use through an API or separately. For instance, if you don’t really like your broker’s charting features, you might subscribe to a third-party charting software that you can use in combination with your broker’s trading capabilities.
Examples of Third-Party Trading Software
Generally, the majority of brokers have their own trading software. However, others provide third-party software. In the Forex sector, many brokers have their own software, but many also supply MetaTrader4 and/or MetaTrader5. Both of them are popular third-party trading platforms.
- Fidelity: It offers Active Trader Pro.
- NinjaTrader: It offers charting, analyzing, and trading capabilities and may be linked to many brokers.
- Charles Schwab: It offers Streetsmart Edge and $4.95 stock trades.
- TD Ameritrade: It offers the Thinkorswim trading platform and $6.95 stock trades.
To conclude, trading software gives tools to traders to assist them to assess markets and execute transactions. Advanced technical analysis and pattern recognition technologies, signals and copy trading tools, and automated robots are all part of the top software. Additionally, excellent one can assist in identifying successful trading opportunities and automating order execution in accordance with predetermined methods. However, the most important is that you should select the one that is most relevant to your trading style.
MetaTrader 4, TradingView, NinjaTrader, and ThinkorSwim are some of the most popular trading platforms. Traders frequently select one of these software alternatives based on their individual preferences and trading strategies.
The price of trading software can vary based on the software provider and included features. Some providers may also provide tiers of pricing based on how many of features you require or the volume of trading you want to do.
Yes, many traders use various trading software solutions together to take advantage of different tools and capabilities. A trader may apply MetaTrader 4 for charting and technical analysis and TradingView for social trading.
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