How to Choose Trading Software

In the early 1990s, trading software started to gain widespread adoption in the investment world. But it has made some significant transformations in the last 30 years. The amount of features in trading software has certainly improved, and the number of platforms entering the market has continued to grow. You can now find software solutions that allow you to read the latest financial news, execute trades, and analyze stocks using a variety of charts and indicators—all on your smartphone or tablet! But with the numerous different options available on the market, it can be difficult to know which trading software program is best for your needs. This guide can help you become more informed on the subject so you can feel much more confident when choosing a trading platform.

Trading software has two main purposes. The first is to execute trades. The second is to analyze the markets and help you make a prediction as to where a specific security is heading. When it comes to buying trading software, you want to choose a platform that provides the functionality you require. You will therefore need to determine whether you want the trading software to primarily execute trades, analyze markets, or both.

It is also important to consider the type of securities you are interested in. If you are interested in stocks, then any trading platform will have the basic functionality you need; however, if you prefer to analyze or trade Options or Forex, then you might need more specialized solutions. Once you have identified your preferred security types, you will need to determine the type of data you want to have at your disposal. There are three main data types: EOD (end of day), real time, and historical. Each type is useful for certain situations. End-of-day data provides information after the markets close, while historical data shows a security’s performance over the years. Both of these data types are suitable for traders and investors who look at daily, weekly, or monthly charts. Real-time data is updated almost instantaneously and provides the most up-to-date information, a capability that will prove to be especially useful for day traders.

Executing Trades

If you are interested in executing trades with your trading platform, then you will need to ensure the software integrates with your broker. In this case, you have two options: you can either use your broker’s software or buy a software that is compatible with your broker. If you don’t have a brokerage account and want to execute trades through your trading platform, then you will have to set one up. On the other hand, if you already have a brokerage account with one of the top players (TD Ameritrade, E*Trade, ScottTrade, Vanguard), then the best and safest bet is to use their trading platform. Online brokers provide good solutions with a seamless trading experience, but the downside is that they usually do not have a robust technical analysis offering.

Once you have narrowed the various options to only those software programs that are compatible with your broker, you will need to consider a few more important features before making a final purchase decision:

Portfolio Management Features: Being able to track your positions and your balance is crucial. You want to know how your investments are performing, how much you have gained or lost, and how much cash you have on hand. Having the ability to create watch lists and track hot lists will also prove to be beneficial.

Trading Features: If you want to optimize your trading experience, you should consider buying software that allows you to automate your trades, as this improves your chance of executing a trade at the optimal moment. Basket trading is another helpful feature to have, especially when you are trading a large amount of securities (15 or more) at the same time. Just know that this feature is mostly intended for institutional investors and funds. An additional nifty feature is paper trading, which allows you to execute trades using fake money. Paper trading is great for people who are new to the investing world or those who want to test out a trading system they just created.

Analyzing the Market

If you are interested in technical analysis, then you will need to consider the following features:

Charting Features: Having access to charts is a necessity, but what will really take your analysis to the next level is having the ability to choose from a wide variety of chart types, examine multiple charts simultaneously, change the time intervals on those charts (minutes, days, months, and years), and utilize drawing tools to analyze them. It is also beneficial to choose a platform that enables you to trade directly from a chart.

Technical Analysis Features: One of the most helpful technical analysis features is backtesting. You should also look for platforms that have market scanners, as they help you identify securities that meet specific predetermined criteria. Custom trading systems is another very useful feature. Some platforms offer a complete development environment where you can create your own system using a specific programming language; others provide a simpler experience, but the level of customization is limited. Lastly, optimizing your technical analysis indicator parameters is key to developing an investment strategy that works well. It is therefore important to make sure the software you choose provides a few optimization techniques to test your indicators.

We have over 100 trading software programs to choose from, so consider these factors and narrow down your options accordingly with our comparison tool to find the best software solution for you.