Trading Software Definition

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Trading Software Definition

What Is Trading Software?

Trading software makes it easier to trade and analyze financial instruments including stocks, options, futures, and currencies.

There are several trading software programs available for traders of various levels of expertise and in a number of marketplaces (e.g., stocks vs. forex).

Key Takeaways

  • Trading software is used for computerized trading and security analysis.
  • In addition to learning how to trade or invest, self-directed traders must use and master their trading software.
  • Order placement, technical analysis, fundamental analysis, automated trading, and paper trading are all common elements of trading software.

Understanding Trading Software

Trading software is often provided by brokerage companies to their customers in order for them to conduct trades and manage their accounts. The program may be downloaded and launchable from a desktop or mobile device, or it may be web-based, in which case the trader logs in to a website to use the software.

Traders may also buy third-party trading software to augment or improve on the software given by brokers.

Because commission costs have decreased over time, more traders and investors are now performing at least part of their own trading and research via self-directed trading accounts. This has boosted demand for software that includes trading capabilities as well as analytical and information resources.

Trading software may offer users with asset price information, specific order types, fundamental data, charts, technical analysis indicators, statistics, chat rooms, and other unique tools or functionalities that brokers and software developers use to attract traders.

APIs, or application programming interfaces, have also contributed to the growth of the trading software business. APIs enable two additional pieces of trading software to be joined together and work as one. This gives consumers access to the advantages of many pieces of software. APIs are not always necessary since a user may run two or more applications separately on their computer, even if they do not interact with each other.

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Types of Trading Software

Trading software comes in a variety of flavors, with functionality given by both brokerages and third-party developers.

Some of the most common features include:

  • Placing Trades: Most trading software allows you to make trades, including as market orders, limit orders, and other sophisticated order types, as well as check up real-time quotations and examine the Level 2 order book. Some trading software will additionally monitor information such as win rate and average profit/loss on closed transactions.
  • Technical Analysis: Most trading software offers interactive charting features, which include both chart patterns such as trendlines and shapes and technical indicators like as moving averages or momentum oscillators.
  • Fundamental Analysis: Some trading software gives users access to fundamental information such as financial statements, analyst ratings, and other proprietary tools meant to help investors with their due diligence.
  • Programmatic Trading: Using advanced trading software, traders may create trading systems that can be performed automatically rather than manually clicking a button. Furthermore, these software solutions may include backtesting capabilities that allows traders to assess how their automated trading systems might have fared in the past.
  • Paper Trading: Paper trading refers to the capacity of certain trading software to execute riskless no-real-money deals. Traders may put their talents to the test to determine how they would do before investing real funds. This function is extremely popular among forex brokers.

Choosing Trading Software

Traders and investors should carefully assess the characteristics they want before selecting trading software. Active traders that depend on automated trading systems may choose trading software that is quite different from an investor who is merely seeking for the capacity to make trades.

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Fee structures, performance qualities, and other variables that influence profitability may vary amongst software products.

Most brokers and software providers enable prospective customers to try their product before purchasing it or opening an account with them. Take advantage of this by experimenting with various pieces of software. Determine which tools and features you like and use. Then consider the benefits and drawbacks of the broker (if relevant) and their commissions.

If you prefer a certain broker, for example, because of their low-fee structure, but not their software, you may be able to discover third-party software that you can use via an API or separately.

If you don’t like your broker’s charting skills, for example, you might subscribe to a third-party charting service/software that you do like and use it in combination with your broker’s trading capabilities.

Examples of Third-Party Trading Software

The majority of brokers have their own trading software, however others provide third-party software. In the forex sector, for example, many brokers have their own software, but many also supply MetaTrader4 and/or MetaTrader5, which is a popular third-party trading platform.

Most brokers in the stock market supply their own software. Here are several big brokers and the software they use.

  • Active Trader Pro is available through Fidelity.
  • TWS is provided by Interactive Brokers, as is a low-cost per-share charge structure.
  • Streetsmart Edge and $4.95 stock transactions are available from Charles Schwab.
  • TradeStation is a popular choice among day traders and busy traders.
  • TD Ameritrade offers the thinkorswim trading software and stock transactions for $6.95.
  • There are also several third-party applications and trading platforms accessible.
  • The NinjaTrader platform allows for charting, research, and trading and may be connected to a variety of brokers.
  • Technical and fundamental charting tools are available from TradingView and StockCharts. These tools may augment trading platforms’ charting capabilities.
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