Stock Trading Program
Dec 17th, 2009
There are two types of stock trading programs common to the trading world. One type is the stock trading program that does everything for you automatically. You either purchase some software or subscribe to a service and all of your stock trading decisions are automated. The other type of stock trading program is just a software package that allows you to enter in your own criteria for trading stocks. There are major differences between these two methods.
Automated stock trading programs
There are plenty of software packages out there that will take all of the work out of analyzing stocks. You basically just enter a few bits of information about your risk tolerance and how often you will be trading and the stock trading program finds stocks and entry points that it thinks will be profitable. Nearly all of the software based stock programs rely exclusively on technical analysis. They examine the historic price of the stock and attempt to determine trends. Sounds great right? Well, if there was a magic bullet like many of these programs claim to be everyone would be making a killing on the market. I’m not trying to say that these programs don’t have any value, they just won’t make you a millionaire overnight. Do your research before purchasing a program of this type.
Another automatic stock trading program involves tying your broker account to a trading service. This basically entails subscribing to a stock picking service (not free, of course) and instructing your broker to make trades based on the stocks that service picks. These programs take all of the guesswork out of your stock trading. You no longer have to do any analysis of your own. By subscribing to a trading service like this you are basically hiring a financial manager (at least for that account). When I think critically about the options available for automatic stock trading, this one seems like it has a bit of potential. If you could pay someone who is very successful trading stocks to manage your money you could potentially earn more than you could trading for yourself. Of course it is up to you to determine whether some service is actually “successful” making stock trades.
Custom Stock Trading Program
The more appealing option for us is to create your own custom stock trading program. You will need a great charting package available from your broker. TradeStation and ThinkorSwim are both highly regarded for offering robust stock trading software. Using the provided software you will have to study the different technical indicators from candle sticks to Williams %R to try to find a combination that works for you. You will be able to enter in different buy signals using the software’s customizing features. Once you have come up with a stock trading system that you think will work you can back test it on historic stock prices.
Creating your own system like this will definitely give you a better understanding of the price action in the stock market. You may not come up with the perfect system, but after practicing with different criteria you will absolutely be more comfortable examining some of the paid services.
We follow the theory that stock trading is a discipline that cannot be learned overnight, and it takes a certain amount of dedication to develop the skills necessary to be profitable. If you are willing to put in a reasonable amount of work, the rewards are more satisfying.
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