Hello and welcome to my YouTube channel – Trading Software Tutorials.

If you’re serious about making money as a trader, then you need information about the most effective online systems to support your trading operations. Whether you want to trade stocks, foreign exchange or futures, having the right information about how to trade will give you a definite advantage.

This video series takes you step by step though the key aspects of trading the financial markets in terms of online tools and trading systems, then moves on to show how to download and use a variety of software programs and trading platforms.

While learning how to use different software programs is essential to successfully trading the financial markets, unfortunately, there is a bewildering array of trading platforms out there.

Some software programs only do one single thing, such as supply raw price data, while others are complex packages in the form of trading platforms which are capable of multiple operations, such as charting packages that let you scan for trade opportunities and backtest entry set-ups, or a broker that enables you to live-trade from a chart provided by a second party, though unfortunately, no single trading platform provides everything you need to trade successfully.

To simplify this seeming chaos, I have divided trading operations into three fundamental categories: price data, charts and brokers. Later I will also look at journaling software, backtesting systems, and trading platforms that allow fully automated trading.

Price data is the basic buy and sell information for any particular financial instrument, over a particular time frame, such as a day or an hour. From this data, charts can be created which allow you to understand movements in particular financial instruments over time, and make decisions about possible trade entry positions. The third category, the broker, is the agency which provides the actual mechanism through which you open and close a trade.

But first, let’s look at the various types of traders and their software needs.

There are three major types of traders: long-term traders, short-term traders, and intra-day traders, though the latter are sometimes called day traders.

Long-term traders buy stocks to hold over an extended period of time – months, years or even decades. They are often known as position traders or investors.

Short-term traders buy and sell stocks over a period of days, weeks or sometimes months. They are often known as swing traders.

Intraday traders buy and sell a wide variety of financial instruments within the same day. Those who use very short time frames, sometimes over a period of just minutes, are called scalpers.

In general, the more intensely a person trades, either as an investor putting a large amount of money into the market, or as a day-trader using very short time frames, the greater their need is for sophisticated trading software systems.

Now let’s go back to talking about our first category: price data.

Regardless of whether you are a long-term investor or a short-term trader your primary need is for accurate price data. 

At the very least, you need information about the closing price for each financial instrument for each time period that you want to look at. For most people other than day traders, that’s the daily closing price.

The next step up is to have the figures for the open, high, low and close price for each instrument for each time period. This is important because the total range of price movement over the time period gives you an indication of the volatility of any particular instrument.

Data timeframes range from one second to one day, and daily charts can be aggregated into weekly, monthly or even yearly charts. The most common data sets that traders use are weekly, daily, 4-hour, 1-hour, 15-minute, 5-minute and 1 minute. Day traders and many short-term traders obtain their data as a live-feed so that they can see price action at any given moment. 

You can obtain data for free through a broker, but this sort of service usually only provides you with end-of-day figures on a static chart. To get live-feed data, you will need to subscribe to a data-providing service, either independently or through a broker.

Now let’s look at the second category: charts. Having data leads to the capacity to create charts which allows you to analyse price action and make decisions about potential trade entry and exit positions. The charts created by live-feed price data are what day-traders and scalpers use to buy and sell so quickly.

If you are just starting out and simply want to invest some money in stocks, you only need a broker which provides its own end-of-day charting software. However, if you are already trading stocks and want to take your activities to a higher level, or trade more varied financial instruments, you will need more complex charting software that will let you trade from the chart, scan on particular patterns at the end of each day, and backtest historical data to determine whether a trading set-up is viable, although these may not all be provided in the same charting package.

For example, the UK broker, IG Markets, supports a direct link to charting specialist ProRealTime to provide live data down to one second. You can also trade directly from the ProRealTime charts, although the broker is still IG Markets. You can also subscribe to ProRealTime independently of any broker.

With access to charting software, you can readily apply technical analysis indicators to price data. But more about that in a moment.

Now let’s look at the third category: brokers. In deciding on a broker, you will need to consider the variety of services they offer, the breadth of financial markets offered for you to trade, the speed of their trading platform, whether they have interactive charts, the fees that they charge, and what other services they might provide, such as a demo account where you can paper trade.

The most straight-forward brokers usually only provide access to local stocks via static charts with only end-of-day data. At the other end of the spectrum, more sophisticated brokers will provide access to global markets across thousands of financial instruments and provide access to complex charting software.

However, in terms of a learning curve, it is better to start with a straight-forward broker, such as one attached to a major national bank in your country, because their software is simple to use and it is not as easy to make trading mistakes as it is with the more complex broker systems.

There are thousands of brokers out there, some specific to a country and some global. You may find that you can only subscribe to brokers in your country, plus a few of the many global brokers, because of national and global banking constraints. This tutorial series does not focus on methods of accessing and using broker websites, except for a few examples. 

There are a number of other points to consider in selecting trading software. Firstly, there is a difference between software that you access via a website and software that you download to be installed on your own computer.

If you are accessing another agency’s website, software upgrades will usually be made available to you at no cost. Whereas if you download software to your own computer, you may need to pay an annual fee for upgrades.

Secondly, many software providers have two versions: a free version that gives you just the basics and a fee-for-service option that gives you full functionality.

There might also be different subscription levels that, with increasing levels of fees, progressively give you more functionality or access to a wider spread of data.

Some providers charge a one-off fee to download their software, while other charge a monthly or annual fee. Many software providers will offer a 30-day free trial and I highly recommend you take this route so you can test out the software to see if it is exactly what you need before paying for it.

Finally, in thinking about your trading software needs, you should consider the extent to which you will want to use technical analysis in your trading activities. So let’s look at that.

There are two different mechanisms by which a person who buys and sells financial instruments makes their decision. The oldest and most common decision-making mechanism for market participants is fundamental analysis. Using this method, potential buyers research information about the stock itself: what sector the stock is in, how well that sector is doing, what the company does or makes, what the market is for that service or product, how profitable the company has been, and what its future outlook is like. This type of analysis does not require daily buy/sell data, or charts, and so is not supported by trading software.

The other decision-making mechanism is technical analysis. This system is based on patterns made by a particular financial instrument which reflect the buying and selling ‘emotions’ of the participants. Technical analysis uses direct and indirect indicators to assist in estimating the probability that a financial instrument will move in a particular direction – up, down or even sideways.

There are thousands of technical indicators available, from simple candlestick patterns to complex secondary charts such as point and figure and Heikin Ashi. Purist TA traders do not take into account anything about the stock or instrument itself, and use only statistics based on price movements to make their buy and sell decisions. Short-term traders and day-traders use technical indicators superimposed on dynamic charts almost exclusively.   

In this overview, we’ve had a brief look at the three categories of trading software: data, charts and brokers. The next video in this series is a more detailed overview of price data: what it is and where you can get it from. You’ll find a link to that video in the description below. 

Please let me know if you are aware of a trading software package that lacks good educational resources. I am always open to creating video tutorials in areas of need.

DISCLAIMER

This video is made available for educational purposes only. It does not provide financial advice of any sort to any person. The narrator of this video is not a qualified financial advisor. Any opinions expressed during this tutorial are the personal views of the narrator and you should not take anything that is said on this video to be advice regarding any investment in any financial product. Should you wish to invest in any financial market, you should seek professional advice from a qualified financial advisor or broker.