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Technical Analysis Software ‘ Invaluable Tool For The Busy Trader
There’s a lot of work involved in trading. You have to keep track of numerous price movements and it’s difficult to always be aware of when important technical indicators show that a good trade is possible without having the right software. A good technical analysis software package can help you with market scanning, charting, back testing, setting up custom indicators, optimisation, importing live data feeds, setting up alerts and connecting directly to your broker’s 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.
The ability to connect to a live data feed is also quite important for technical analysis software. Most of these data providers don’t only provide live prices, but they also send you lots of market news, trading tips etc. If you are working form home this will be very useful since it might be the only way for you to be stay on top of vital market information.
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