What comes to your mind when you think of day trading software?
If you are thinking of forex robots that will make you millions as you sleep, this article will waste your time.
But if you are thinking of tools to help you trade, chart, and analyze better, you will want to read on.
Day Trading Platform
A trading platform is a software that traders use to send their trading orders to their brokers. Day traders must use a trading software to send our orders because speed is critical for day trading strategies.
Let’s go through the factors that affect our choice of trading platform.
1. Choice of Broker
Before zooming in on specific trading platforms, note that your choice of broker often restricts the trading platforms available to you.
Most brokers have their in-house trading platforms. Depending on your broker, these platforms are available as web applications, standalone desktop software, or mobile applications.
For many brokers, you must use their in-house trading platforms. Your choice of broker directly determines your trading platform. Hence, in such cases, you should definitely consider the features of the trading platform when selecting your broker.
However, some brokers are more flexible. They offer application programming interfaces (APIs) that allow you to trade with third party trading platforms. Examples of such third party trading platforms include NinjaTraderTM (TSR’s preferred platform), Multicharts, and MetaTrader. As the compatibility of third party trading software depends on the broker, you should take note of what your broker offers.
2. Reliability of Trading Platform
The trading platform plays a critical role as it sends time-sensitive trading orders for market execution. It should transmit our orders reliably and the connection to the trading servers should be stable. Reliability and stability are extremely important.
Generally, a broker’s in-house trading platform is more reliable than a third party software due to a smoother back-end process. If the in-house trading platform does not lack any critical feature, prefer it over a third party option.
While trading platforms on mobile devices are increasingly common, trading with mobile application is less reliable as mobile network coverage is inconsistent in many areas.
3. One-Click Trading
To safeguard against accidental submission of orders, many trading platforms need you to confirm your trading order. You will need to click once to submit, and once more to confirm.
However, most day trading strategies require immediate response once a trading setup presents itself. Hence, one-click trading is essential for day traders.
In day trading, it just doesn’t make sense to deal with the dialog box asking, “Are you sure you want to submit the order?”
4. Bracket Orders
Bracket orders consists of two orders that surrounds the current market price. Once one of the orders is executed, the other one is cancelled automatically. Hence, traders also call them order-cancel-order (OCO).
In fast intraday time-frames, bracket orders are extremely useful.
For every trade I take, I enter bracket orders to manage my position. A limit order stands ready to exit with a profit and a stop order limits my loss.
Bracket orders are also helpful for trading ranges. Stop orders just outside both sides of a trading range can catch break-out trades in both directions. For fading break-outs, bracket limit orders will do the job.
Decide if you need to employ bracket orders depending on your trading style and strategy. If you do, make sure that your trading platform has that capability.
5. Trading Simulation
The ability to paper trade is effective for familiarizing yourself with the platform and for testing out new trading strategies.
While a trade simulator is not essential for some day traders, beginners should find value in having one as it definitely facilitates the learning process.
Day Trading Software For Charting
A charting platform plots market data in charts for technical analysis. Most day traders use technical analysis, either completely or as part of their trading method. Hence, a charting platform is another requisite day trading software.
To choose the right charting platform, you must already have a day trading strategy in mind as different trading methods require different charting tools.
Take Your Pick: Trading Strategies
1. Drawing Tools
You can draw trend lines and horizontal lines to mark out support/resistance zones with any charting platform.
2. Trading Indicators
Review your trading strategy and list down the trading indicators you need. Check that your charting software has the tools of your trade.
If your preferred charting platform lacks your favorite indicator, do not despair. Find out if you can import or code custom indicators. If so, you can create your favorite trading tool easily.
3. Chart Trading
Trading and charting software often overlaps. It is common for both in-house and third party platforms to combine trading and charting abilities.
For those software, you might be able to trade from the charts. Chart trading is especially useful for day traders as it grants us the ability to trade without taking our eyes off the chart.
Chart trading is on my personal must-have list when it comes to selecting day trading software.
Day Trading Software For Review/Analysis
Most traders overlook the role of software for trade recording and analysis.
Keeping good trading records is the key to post-trade analysis and trading plan development. However, it is a tedious process. And a solid software can certainly go a long way in reducing the hassle.
1. Trade Records
For each trade, we need to record an array of information including:
- Entry time
- Exit time
- Entry price
- Exit price
- Maximum adverse excursion
- Maximum favorable excursion
(This list is not exhaustive.)
These information will help us review and improve our trading performance. For instance, your trading records might reveal that your trading strategy works better at certain times of the day. Or, you might find out that the maximum adverse excursion of your winning trades is consistently within your stop-loss distance. In that case, you should consider tightening your stops.
To derive these useful conclusions, we need to slice and dice the trade records in different ways. A spreadsheet software does exactly that, and is ideal for recording and analyzing our trading records.
I recommend Microsoft Excel for its advanced data analytics capabilities. You can filter, sort, apply pivot tables, calculate statistical metrics, and even run Monte Carlo simulation using your trade records. You can find support for it easily and there are many trading related Excel plug-ins.
For free alternatives, you can try Google Drive or OpenOffice. Compared to Excel, Google Drive’s functions are limited and support for OpenOffice is lacking. However, they are sufficient for basic trade analysis.
2. Chart Notes
Chart snapshots showing our trading setups are valuable study notes for serious day traders.
An excellent software for annotating charts for study is Microsoft OneNote. It allows you to draw, hand-write, and type notes on screen captures effortlessly. Furthermore, you can sync your notes across different mobile devices and review your chart notes on the go. You can do a lot more with OneNote.
Video-recording your computer screen, or screencast, is also an effective way to record our trading setup charts. This method captures the entire trading process. You can narrate your ongoing analysis verbally. It is great for post-trade reviews. However, unlike OneNote, our verbal notes are not easily searchable and organizing these recordings might be challenging.
Choose Your Day Trading Software Wisely
A final tip. Spending more money doesn’t always means better trading performance.
Understand your trading style and gather the tools you need to trade (cost) effectively.