Monday, January 13, 2014

“How to Choose the Right Charting Software for You”

Whether you are a independent investor, mutual fund investor, position trader, swing trader, or options player one crucial tool you need to succeed in today's institutional dominated marketplace is a good charting system. There are many charting software vendors including free internet based charting services, and many brokers now have basic charts as part of their online broker system.  The plethora of charting software has occurred over the past decade because it is the only way that the retail investor and retail trader can see what is going on in the hidden professional side of the market, where giant funds trade on Alternative Trading System platforms that are not in the exchanges and where High Frequency Traders control the open of the market. Often investors and traders are losing money not because they aren't capable, but because they are using inferior charting.
Without stock charts the average investor is trying to shoot darts in the pitch dark.  Even mutual fund investors must use charts to track the success of the mutual funds they select in an easy to use graphical format. For position, swing, and day traders stock charts are an essential part of trading. For Options players, charts are critical because the outdated options indicators no longer work. How do you choose the right Charting Software for your needs?
Professional charting systems are very pricey, often running in the range of one thousand to ten thousand a month for the charting service. Fortunately there are very low cost charting software that are excellent for retail investors and retail traders. Unfortunately many retail investors and retail traders try to use free charting services or the basic shell type charting system that comes with their brokerage account. Broker charts are not complete charting programs because they are not designed for trade analysis.  If you want to be highly successful and make consistently excellent profits from trading stocks, you need a charting program that can do the 7 things listed below.
  1. Scans: A Charting program must be able to scan all the stocks in the market at one time or in groups based on criteria which include leading indicators, not the outdated indicators written decades ago like MACD and Stochastic. Leading indicators expose where the institutions are buying or selling before price moves.  Scans must be extremely adaptable so that you can have custom scans which bring up specific stocks with candlestick patterns and leading indicators.  Free stock charts and broker charts do not have scans, or if they do there is not the ability to create custom criteria. Scans are a necessity and the better the scan the faster your chart analysis and stock pick selection. Without scans, you are stuck using news or broker recommended stocks which means you are trading stocks your broker has in inventory and wants to sell to you to make huge profits from your trades. Scans are a critical tool. They separate the truly serious and successful trader, from the hobby trader who constantly loses money.

  1. Leading Hybrid Indicators: The charting software must have all the modern new leading hybrid indicators, not just the old outdated indicators every broker promotes.  There's a reason why they don't provide leading indicators.  Indicators must capable of being modified and adjusted. In addition they must have different period settings and be capable of adding subordinate indicators or dual primary indicators on the same template.  Indicators are an essential part of highly profitable trading.  Tracking the institutions to know where they are accumulating and distributing, will be worth every penny spent on your charting software.

  1. Custom Indicators: The charting software should be able to have custom indicators that can be modified to your trading style, so that your set of indicators is unique to you.  Professional traders have their own proprietary indicators they do not share with anyone else, which keeps them unique and earns them higher profits.  There should be indicator templates that can be saved and used over and over every time you study stock charts.  Indicators must include not just stock indicators but also fundamental, financial, historical, and market indicators so you don't need to search for information but can quickly see how many institutions hold the stock, and what percentage of ownership of the outstanding shares is held by institutions.  A complete set of indicators that can be adapted and modified, with the ability to add new indicators is an essential tool for every trading and investing style.

  1. Conditional Sorts: Some free charting software and broker software have a few sorts, which are mostly very basic or completely outdated and not relevant for today. Sorts in the best charting software will have Conditional sorting capability, and multi-tier sort capabilities. Conditional sorts save huge amounts of time and keep the best stocks rising to the top of your Scans and Watchlists.  These sorts are a tool every professional uses because they save time, keep their workflow efficient, and present better stocks to trade than news, guru, or broker recommendations.  Superior stock picks mean superior results. 

  1. Watchlists, Lists and Alerts: Watchlists, analysis lists, etc. are another must have feature that most free charting programs do not have.  Being able to put stocks on a Watchlist for future study and monitoring is crucial to higher profitability and stronger stock pick selection.  Being able to have as many Watchlists as you want with all types of criteria and sorting capability is a huge asset to investors and traders. You want to be able to spend less time searching for stocks or listening to the news, and more time enjoying your profits from trading. Alerts are a new addition for many charting programs and function similarly to professional alert systems within charting software. Alerts keep you on top of stocks that may not be ready with the ideal entry at the moment, but will be a in a few days.

  1. Market Data:  If the data in your charts is not accurate or up to date, it can harm your trading without you even realizing it.  Data needs to be structured in a manner by the charting program that allows you to see various time frames, patterns, and layouts so that you can determine who controls price at that time. There are 9 major Market Participants all trading and investing at different times and on different order processing platforms; 54 Dark Pool Alternative Trading Systems ATS, 9 Electronic Communication Networks for Electronic Trading aka Day Trading ECNs, and 16 US Exchanges. Data must be gathered properly and accurately from a vast number of locations, so make sure the charting software you use has reliable Market Data.  Just because it is in your broker account doesn't mean the Data is properly structured, sorted, documented, and delivered timely.  Your software should also include other market data beyond just US stocks.  If you are trading in another country, you need charting programs which have that market data accurately displayed and readily available.  If you want to trade other instruments beside stocks, the charting software must include data for that instrument.

  1. Trading Style Customization: The Charting program must have the capability to be customized in every way for your trading style.  That means far more flexibility and customization than broker free charting programs.  Attempting to use charting software that is not designed and customized for your trading style increases risk with the probability of glitches, mistakes, and bad trades.  Your trading style is foremost when choosing a stock charting program.  Make sure the program has a feature for your instructor or mentor to write you notes and provide training within the charting software structure.  Having access to your teacher's education and training will help you improve as you learn to trade. Trading style customization allows you to trade without having to compromise your trading screens and monitors, because you can lay them out properly for maximum online instant analysis.
Most traders spend inordinate amounts of time trying to find stocks. By spending a small amount of money and investing in a complete charting software program with all the features you need to find the best stocks for your trading style and trading parameters, you are now trading like a professional and can earn professional level profits.
Sure you can continue to use that free basic charting program, but you are pinching pennies and throwing away huge dollars in profits. You are maintaining the status quo of mediocre retail trading results, and keeping yourself stuck in a system that is not designed to make you highly profitable. Take charge of your trading by investing in tools that can help make you successful.
Martha Stokes CMT
Chartered Market Technician
Member of Market Technicians Association
Master Rated Technical Analyst for Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader Stock Market Courses
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Adam Smith said...

Sure, you may keep using that free basic charting application, but you're squeezing pennies and losing big bucks. You are sustaining the status quo of average retail trading performance and are trapped in a system that is not meant to make you extremely lucrative. Take control of your trade by investing in equipment that will help you succeed - Mobisoft

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Anonymous said...

As someone who has spent a lot of time working with different charting software, I can say that choosing the right one can make all the difference in the world. Not only will it help you to create more professional-looking charts and graphs, but it will also save you a lot of time and hassle. When it comes to choosing the right charting software, there are a few key things to consider. First and foremost, you need to think about what kind of charts and graphs you'll be creating. Different software programs are better suited for different types of data.

Alex Evans said...

It's always enlightening to read diverse perspectives on this topic. In parallel, I've been exploring how industries are leveraging specialized tools, like pest control software , to enhance their services and efficiency. The rise of such targeted solutions underscores the importance of adapting and utilizing technology in various sectors. Would be interesting to see if there are overlaps or parallels in the points discussed here. Keep up the great content!