Stocks

How to Choose the Best Automated Stock Trading Software

Get the Information You Need to Evaluate Stock Trading Software

In today’s market, investors are wondering if they should even buy stocks and if they can make money. The answer to both is “yes.” Stock market trading is a wonderful opportunity now, with prices lower and volatility higher than in many years. Stock trading online has never been more popular.

Automated trading platforms, robotic trading programs, online day trading systems-there are many terms used to describe the stock trading systems that can help you to make a stock investment and to grow your money. Review the criteria below and understand your own personal preferences by talking with other stock traders. Identify the facts you need to compare programs. You’ll need a good understanding of the automated trading tools’ features and costs before you make a decision.

Many types of companies offer stock trading advice and stock trading strategies. They run the gamut from educational programs that aim to teach you how to trade, to a list of recommended stocks to buy and sell at certain triggers, to brokerage firm proprietary software, all the way to fully automated robotic software.

Prices can vary from thousands of dollars to less than $50 a month for some auto trading software. With such a variety, how do you choose? This article will guide you through the features and benefits of the programs that are available for online stock trading. We will not discuss trading software for options or Forex trading.

Many of the programs are geared towards “day traders,” who technically open long positions (buy) or short positions (sell short) and close these positions the same day. Not everyone who uses these programs closes out their positions by the end of the trading day–sometimes they hold their positions for days, weeks or months. We’ll call this “active trading.” Sometimes this is also referred to as “swing trading.”

The essential features of a stock trading program include a data feed for stock quotes and indicators, stock charts or charting capability of major indicators, current balance and positions and an order entry system. The order entry system should allow stop (loss) orders, stop limit orders and trailing stops.

A trailing stop limit is similar to the stop (loss), except its loss will be measured from the stocks highest point achieved. The preferred method would be to keep the trigger prices in stealth mode, not viewable by the market makers, rather than as actual orders. Most automated trading software should include a watch list of the stocks to potentially trade based on the parameters the stock trader has entered.

Exchange Traded Funds (ETF’s) can be part of an efficient trading strategy. These are mutual funds that are traded intraday on the stock exchanges, unlike traditional mutual funds that are a basket of securities priced at the close of the market. Online stock trading systems should also include trading capabilities for ETF’s.

Other features to look for include safety measures that stock traders may take, such as establishing a profit goal–the minimum price increase a trader would expect a stock to gain before closing their position. Also highly desirable is a form of profit protection for your investments, which is the reduced profit goal. After the stock reaches its profit goal and continues to rise, the stock trading software should wait and let the profit increase.

If the stock price decreases or pulls back, the online trading program should close the position and lock the profit. This pullback value should not have any effect before the profit goal is reached and is intended to improve stock performance. More sophisticated auto trading programs will also offer the percentage gain from stock trader’s entry price, and the trader can also specify a minimum amount in case the percentage gained is too low.

Check the Features and Ask Questions

Number of Technical Indicators – There are literally hundreds of indicators that stock traders can use to determine which stocks to buy and sell and when. The most robust programs will offer hundreds of indicators for technical analysis, such as Bollinger Bands, and some will even include indicators for Candlestick Chart formations. Robotic programs use these indicators to set conditions under which online investing will occur.

Complexity – Automated stock trading programs vary greatly in ease of use. Some online stock trading systems do require actual programming expertise. Others are simply point and click. Check out the online demo to see that it fits your level of comfort before making a commitment. Talk to others who are currently using the auto trading websites and check out their online communities for more comments.

Number of Long and Short Strategies Per Account – Due to the size of the online trading platform, there may be a limit to the number of strategies that you can have loaded on each account. If you want to run, say two long trading strategies, then you may need two accounts. Also confirm if you have enough memory on your computer for two or more accounts. Experienced active traders may run two or more live long and short strategies, while having additional accounts for strategies that they are testing in a simulator mode.

Find Out How Advanced Your Software Can Be

Recommended Additional Features – The best automated stock trading software will include additional features that active traders will find invaluable once they have begun automated trading.

Additional strategy and order entry features include the ability to add to a position as a stock goes up, or as the stock declines, as well as a minimum purchase interval that the stock price should drop before it begins purchasing additional shares. A maximum bid/ask range will also be helpful, as the size of the spread can directly impact a swing trader’s ability to make profitable trades.

If there are hundreds of indicators, as is the case with robotic traders, see if the definitions of the indicators are readily available. The definition or formula for indicators may vary from one electronic trading platform to another, so be sure you understand them first.

Recommend you have a program that displays current Profit and Loss (P&L) on your open positions and the status of the rules on your watch list. For example, if a stock on the watch list hasn’t traded, is there a feature where the trader can pull up the rules and indicators to see which one(s) is preventing the trade?

Some automated stock trading programs visually display the percentage of symbols up and down in each sector from the specified time frame to the current time so you can see how the market is turning. Does the platform include the ability to block certain symbols from trading? If you’re running a long trading strategy, you won’t want to be buying ETF’s that short the market.

Day traders will want automated trading software that tracks and displays the number of day trades remaining. Day trading is regulated by the SEC, so it’s important to understand if you will be day trading first.

Orders in Stealth Mode – A standard feature of many trading software programs is the ability to enter limit, stop and stop limit orders. While it is important to have an exit strategy from your positions, telegraphing it to the institutional traders in the form of publicly viewed limits is not. It’s a little like poker–whoever can see all the hands has the advantage. Instead, newer programs allow the user to enter these price points in the auto trader system, but trigger a market order when the conditions are met. This is one advantage of a truly robotic stock trading program.

Automatically Executes Your Trading Strategy Even While You’re Away From Your Computer – Very few stock market trading systems can actually do this. For those that do, it’s done based on the trader selecting technical indicators, comparison operators and numerical inputs that will activate opening, adding to, or closing stock positions. Essentially, it’s a rules driven software system.

The trader can select from hundreds of historical indicators representing the stocks’ previous conditions. The indicators should be updated daily using the latest data. Programs that can trade automatically are the cream of the online investing software crop. They take the emotion out of investing. Long time traders report that the simplest strategies, when left to run on their own for long periods perform best. The program should also have a manual override so the stock trader can manually place a trade as well. Specifically ask if the system has this capability. Many market themselves as “automated trading” but are not truly automated.

Ability to Simulate Strategies In Real Time Before Running Live – Most traders would agree that they’d wish to “test drive” a system before using it. Some programs allow this through “back-testing,” during which the program uses past data to execute the trades and show you what they might are.

This is often not always accurate, as there’s much data needed to perform a radical back-test and it’s nearly impossible to duplicate all the circumstances with just the historical data. additionally, how the system performed during a market last month or last year doesn’t indicate how it’ll perform within the here and now.

There are a couple of systems that allow the trader to simulate strategies, but this is often done mostly with paper tickets, instead of through the software package. the simplest stock trading software will allow you to practice stock trading employing a live real-time data feed during market hours. this is often the well-liked method, because it gives traders a really realistic view of how their trading strategy is performing and therefore the ability to feel the highs and lows of daily trading without investing real money. If you’ll simulate trades, you will not get to open an actual account until you go “live” with real money. Ask if there’s a limit on how long you’ll run within the simulation mode.

Shows you ways to make A Stock Trading Strategy – There should be a step by step rehearse to point out novice traders the way to create a trading strategy. Are there off-the-shelf strategies that are available for your use? Are there any fees involved or are they offered for free? are you able to modify the off the shelf strategies?

Note that firms shouldn’t be guaranteeing you a particular return. the simplest firms will have long and short stock trading strategies available at no charge and can allow the trader to make their own. Some firms will even allow you to repeat strategies from a “friends” list. One size doesn’t fit all. If the corporate doesn’t tell you the small print of the strategy or why they chose or recommend a particular stock, then it isn’t advisable to use it. you’ll overpay for “proprietary” services and should be ready to obtain free stock exchange tips and proposals online which will perform comparably.

Tech Support and Customer Service – the simplest automated stock trading software firms have a particularly high “up-time” and are very rarely out of service. Check on the firm’s record–how often have that they had outages? The software should be easy to put in and will work with a spread of operating systems (Windows XP, Windows Vista, etc.). If you’ve got questions, is there a knowledgeable and helpful staff to supply service? How quickly do they respond, if by email?

Commissions – Trading commissions can fret your profits if you’re not careful about choosing an idea that matches your needs. Commissions can vary greatly from broker to broker, counting on the amount of shares traded, whether the shares are in round many 100, price of the shares traded and therefore the number of trades you place monthly. Stock traders may even want to possess quite one account if they need a trading strategy that normally trades 100 shares lots and another that trades 1000 share lots. It pays to read the fine print.

Number of Broker Choices – If you’ve got a proprietary brokerage software package, then you will only be ready to trade through that firm. the simplest online trading includes rock bottom commissions for the standard trades for every strategy that you simply use. There are other programs whose software has been integrated into the order placing functionality at a spread of brokerage firms. Commissions are going to be one consideration in choosing a firm. Another is that the margin rates.

If you select to possess a brokerage account and borrow against the worth of your securities to open more positions, you’ll be charged margin interest. Rates will vary by firm. Typically, firms with rock bottom commissions won’t pay you interest or offer a market fund for your uninvested cash. this is often how they keep their costs down. If you anticipate having extra cash that you simply won’t use for trading, you’ll want to stay it in another account where it can earn more. you ought to also check if there’s a minimum to open an account or a minimum number of trades required.

Check the prices and Software Support

Initial Software Fee and Monthly Fees – Ask is there’s an initial fee to shop for the software package. Is it thousands of dollars? If so, determine what you’re really getting. Much of what you’ll obtain from a number of these programs is often found in inexpensive books or on the web for free of charge. Is there also a monthly fee? If so, what does it cover? In reviewing online trading services, costlier software isn’t necessarily better. Some active investing services are less costly because they need more subscribers.

Data Feed Fee – Does the program include real time data feeds for stock quotes and indicators? Is there an additional fee for this or is it included within the basic monthly fee? this is often the most important component cost in developing automated stock trading programs. Or, is that the data delayed by 20 minutes? Is it only the top of day data? If so, even during a simulation, old data isn’t good data. Many brokerage firms offer free Level II quotes to qualified active traders who trade a specified number of trades monthly.

Stock Charts Fee – How will you review the main indicators that you’re using to form trading decisions? Some programs include stock charts with their fee; others charge a separate fee for it. counting on the platform you select, you’ll or might not need a charting package. determine what proportion are it and the way much you’ll customize the stock charts to trace your favorite indicators.

Ongoing Support Fee – Ask is there are the other fees. Hidden fees will certainly each into a stock trader’s profits. If you are not within the market to form money, then you should not be within the market.

Long Term Contract – is that the fee you’re paying upfront for a year’s contract? If so, is it automatically renewed every year?

Training Fee – determine if there’s a separate training fee. For programs that market themselves as financial educators, there’ll be a fee, sometimes hundreds or thousands of dollars, as this is often how they create their money. the simplest automated stock trading software programs provide free training.

Training Formats – is that the training within the sort of a live seminar? Webinar? Are there extra materials like DVD’s that you simply must buy to seek out all the knowledge advertised? Or, is live training available within the company’s office?

Minimum to take a position – Brokerage firms have their own minimums but there also are account minimum balances required by the Securities and Exchange Commission (SEC) for what it calls “pattern day traders.” each day trade occurs when a trader opens and closes an equivalent position during a brokerage account on an equivalent day.

A pattern day trader is a person who executes 4 or more day trades within 5 business days during a brokerage account, provided the amount of day trades is quite 6% of the entire trades within the account during that period. All pattern day traders must maintain a minimum of $25,000 in equity in the least times.

System Requirements – The more robust the trading system, the greater the memory requirements. Check this before you check in or purchase a replacement computer. If you check in for quite one account, will your machine have enough RAM to run both or will you would like to get an additional computer or more memory? If you’ve got a Mac, ask if the software works on Mac, as not all do. you’ll want to possess one computer dedicated only to your automated stock trading programs and not run other data processing or spreadsheet programs.

Reports – the simplest automated stock trading software will include a reports function that permits the trader to tug up trades by time-frame, security, long vs short, open vs. closed and P&L. For truly active traders, this information is a simple thanks to track trading for tax purposes.

Trading Strategy Statistics- additionally to Reports, another great feature is strategy statistics. they’re going to tell the intense trader the amount of trades executed and break them down by profitable vs. unprofitable over various intervals. Reviewing the strategy accuracy increases the chances that a trader is going to be profitable.

Online Trading Community – Trading platform developers who are truly pleased with their work welcome comments and questions from users. Take a while to read their stock trading forum and see what other stock traders are saying. There are even a couple of automated stock trading programs which will take requests for extra indicators from their users.

Take the proper Steps as you select Stock Trading Software

Be wary of these who tell you that you simply must follow their stock trading system using only their tools. this is often about you having control over your financial future. There are as many successful stock trading strategies as there are active traders. Experiment, ask others and do research. you’ll find what works best for you.

Use caution when signing up for love or money long-term, albeit a 30-day free trial is obtainable. Some firms may request an outsized deposit or full payment beforehand and pressure you on the spot, promising a reduction if you check in immediately. Some consumers have reported difficulty in obtaining refunds even once they have followed the procedures exactly.

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