Technical Analysis Software ‘ How It Can Help You To Trade More Successfully
One way of making light work of the functions involved with technical analysis is by using a technical analysis software package. Most of these packages to some extent share the following features: back testing, charting, market scanning, optimisation, customer indicators, alerts, live data feeds and the ability to connect directly to a broker platform.
Charting is a very important feature of virtually all software packages. A chart is simply a way to graphically present changes in the price as well as trading volumes of a specific market instrument, such as currencies or stocks. Charts come in many shapes and sizes ‘ the simplest one being the line chart. A very popular chart type is the candlestick chart, while many traders still prefer the ease of use of the bar chart.
The main advantage of using charting software is that it makes it very easy to see when a specific technical indicator generates a trade signal. A basic example is when the price of a commodity rises above the three week moving average. If you are connected to live price feeds these charts can be generated automatically by the software ‘ setting you free to simply react to certain trading signals.
Another important feature of most good technical analysis packages is the ability to back test a trading system. If you get a bright idea and you want to see how it would have fared in real life, you can back test it on historical data with this feature.
Optimisation is the process whereby the trader fine-tunes his trading system using historical data to try and find the optimum solution for real life circumstances. The danger of over-optimising a system is that it will work perfectly on a given historical set of data, but since the past seldom repeats itself in exactly the same way, the system might not work at all in the future.
Your technical analysis software should have the ability to import a live data feed. That simply means that it should be able to connect to a provider of this information and download prices in real time as they go up and down. Especially for a day trader this is extremely important.
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