Technical Analysis Software ‘ How It Can Help You To Trade More Successfully

Posted on September 5, 2010
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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 forms a very important part of technical analysis. A chart is a graphical representation of movements in price and trading volumes of a particular market instrument, e. G. Stocks or currencies. Charts can take many forms: line charts, candlestick charts and bar charts are but a few of the available options.

Using charting software the trader can easily see when a particular technical indicators performs a certain action. A simple example is when the price of a stock moves through the moving average, or break out of a Bollinger band. With automated price feeds these charts can be drawn ‘on the fly’ by the software ‘ the trader can simply wait for a desired scenario to occur.

Back testing is another important feature that helps traders to assess the potential profitability of a trading system. With back testing you can test a new trading system you have developed against historical data to see how it would have done under different real life scenarios.

Should you find a trading system that does great in the back testing arena, you can make use of optimisation to fine tune it and get even better results. There is an inherent danger in this: it’s very seldom that the exact same set of circumstances will replicate themselves in the future. The fact that your system works perfectly on an historical set of data is therefore not a guarantee that it will work in future circumstances.

You should also make sure your technical analysis software has the ability to connect to a real-time data feed. You will therefore also need a provider of real-time data. Mostly they will give you more than just live prices. Often you will get valuable market information, SENS notices and trading tips as well.

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