The benefits and risks of using stock trading software

Stock trading software can help you identify rising stocks for short-term trading and sustained income stocks for long-term investments. It provides guidance on which shares to trade, but past performance is no guarantee of future results and the applications do have limitations.

What is stock trading software and how is it used?

Also called technical analysis software, stock trading software provides research and analysis tools that allow you to investigate the stocks you’re interested in buying and selling. It can give you information about the past and present performance of a company, live stock updates and recommendations about which shares to trade. Trading software also includes technical indication functions (indicators) that look at patterns in the past to predict future performance. And some software has additional tools like advanced charting and custom tax reporting.

You can use the software to help create your trading strategy. A trading strategy sets out when you want to buy and when you want to sell securities. It includes criteria for buy and sell orders, including risk management measures like stop loss orders, that are designed to meet your investment objectives.

How does it work?

Online trading software works by filtering the best stocks for you to trade based on predetermined criteria. You can use stock trading software no matter your investment strategy, but it’s especially favored by day traders looking to take advantage of price movements before the market closes.

Is trading software the same thing as a stock trading platform?

No. A trading platform acts as an intermediary between you and a stock exchange so you can make trades. Although some packages can automate trades, stock trading software is not designed to place trades for you, but rather to help you with market analysis.

Our top pick: TradingView

  • Screen stocks with over 100 filters
  • Speed things up with premade lists of noteworthy stocks
  • Join a trading community to swap ideas and learn more

Our top pick: TradingView

Easy and intuitive for beginners, and powerful enough for advanced chartists

  • Best HTML5 Charts
  • Customized Technical Analysis
  • Stock Screener
  • Backtesting. Backtesting is a stock trading software feature you can use to test your trading strategies without spending a dollar. Your chosen trading strategy is tested against past performance of securities and different investments to give an indication about future performance.
  • Notifications. Software can send alerts to your mobile phone when your trading signals have been met so you can execute your trades.
  • Education. Software applications feature educational tools you can use to learn about the software itself as well as different trading strategies and indicators.
  • Updates. Software developers are constantly improving marketing analysis software so you’re always up to date.
  • Product testing. Most stock trading software packages include a free trial period or free level of service. You can even ask the software provider for a list of the package’s recommended trades over the last couple of months if you want to assess the performance of the software’s technical indicators.
  • There is no perfect system. There’s no guarantee you will make money using market analysis software. Government regulators advise investors to steer clear of any software promoted as a foolproof way to make money on the stock market. Online trading software can help you make a best guess about which stocks to trade, but the economy and the markets are unpredictable. While we can see market trends over time, these movements can be difficult to spot without the benefit of hindsight. Major international events such as the 2008 Global Financial Crisis can completely disrupt market trends.
  • Backtesting limitations. While backtesting is a major benefit, it has limitations. For example, backtesting can provide false signals during periods of high volatility.
  • Active trading. Stock trading software has simplified day trading for everyday investors. Although there’s potential for quick profits, day trading is a high-risk investment strategy. Day traders can invest in securities, forex and commodities to take advantage of price movements before the close of the stock exchange.

Some software is expensive, though there are affordable alternatives. It’s important to research stock trading software before you commit to making a purchase so you can be sure the features offered are the best you can get for your budget. Consider:

  • Cost. How much are you willing to pay? Compare ongoing costs against one-time fees to narrow down your options.
  • Speed. Speed is of the essence when it comes to trade execution. Check customer reviews for speed-specific red flags.
  • Accessibility. Does the software you’re considering integrate with the hardware you plan to use? Some software only works on Windows computers — others are web-based and require an Internet connection.
  • Analytics. Decide which features and analytics matter most so that the software you select best meets your needs.
  • Demo account. Look for stock trading softwares with demo accounts so you can familiarize yourself with the platform before committing to a purchase.
  • Indicators. Different software applications make use of different indicators. Indicators are algorithms which help you decide which stocks to trade. For example, popular market analysis software Metastock provides the RMO trading indicator, something that isn’t available with other packages such as BullCharts.
  • Free trial. You can request a free trial of most stock trading analysis packages so you can test the features on offer before you buy the software.

Once you have your trading strategy in place, you’ll want to sign up for a platform that lets you purchase stocks, options and whichever investments you plan to use. Compare platforms to find one with the investment choices and features you’re looking for.

Name Product Signup bonus

$0

Stocks

$0

0%

Free stock (chosen randomly with a value anywhere between $2.50 and $200)
Sign up using the “go to site” link

Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.

$0

Stocks, Bonds, Options

$0 + $0.65/contract, $1 minimum

0%

N/A

IBKR Lite offers $0 commissions, and IBKR Pro offers advanced tools for professional traders.

$0

Stocks, Options, Cryptocurrency

Stocks & ETFs: $1/contract to open, $0 to close, $10 max/leg
Futures: $2.50/contract to open, $0 to close

0%

Get 100 shares of stock (worth $1 to $6 a share)
Open and fund a new cash or margin account with $2,000+

Trade stocks, options, ETFs and futures on mobile or desktop with this advanced platform.

$0 for US stocks

Stocks, Options, ETFs

$0

N/A

Trade stocks on the US, Hong Kong, Shanghai and Shenzhen markets.

$0

Stocks, Bonds, Options, Mutual funds, ETFs, Cryptocurrency

$0 + $0.50/contract

$50
Deposit qualifying assets of $5,000+

A platform built for all kinds of traders and all styles of trading

The right stock trading software can help you manage and backtest investment strategies. But compare your options with multiple software providers before you make a decision.

  • You can purchase a software application subscription or you can purchase the software outright.

  • Be sure to check the system requirements before you purchase a particular trading software. Not all packages work on all systems.

  • Most software packages come with an online and offline data feed so you can stay up to date with the latest prices and news. You may be able to import data from multiple sources; however, bigger trading software packages such as Metastock can only use the Metastock data feed.

    In some cases, you may be required to link an external data feed to the trading software for the application to work. In these instances, you can use data from search engines such as Yahoo or you can import your own data if the software supports the data format.

  • Stock trading software can provide real-time data and end-of-day data. As the names suggest, real-time data is updated as it happens and end-of-day data is only refreshed at the end of the trading day. Frequency of data updates are suited to different types of traders, with day traders benefiting most from real-time data updates.

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