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 THE ABC OF... |
Software
The software solution: what's on offer
CS Journalists
Most traders can get by with just a computer, a modem for Internet connection, a data feed and some way to chart or analyse trading opportunities.
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"Whenever we upgrade our software, I see an increase in productivity. Everyone finds something to do so they don't have to deal with the new software." |
The software you need really hinges on how you trade. Technical analysts will need a sophisticated charting package, scanning tools and some way to back-test trades.
Fundamentalists, in contrast, rely more heavily on company profiles and financials, news and analyst opinions. Although an online broker will supply some of this information, fundamentalists will also subscribe to, say, a newsletter (see the newsletter table) for expert opinions, and an online financial site (like this one)for up-to-date news on companies, sectors and markets.
It's often said that traders should never rely on technical analysis alone, so you will probably need to integrate tools specific to both approaches.
Scanning software
Scanning software is an essential tool for technical traders. Basically, scanning software lets you scan all possible stocks in the market based on your favourite indicators - which might include Momentum, RSI, Ultimate, Stochastic, CCI's, OBV and Price Oscillator. It's then a matter of charting the stocks - possibly combining some fundamental research - and then deciding whether there are any trades worth leaping on.
Most scanning software lets you hone your technical analysts skills by back-testing your favourite indicators against historical market data to arrive at a past performance figure. In other words, had you followed your trading system to the law, you would've made 11 per cent a year, for instance. Of course, the past hardly guarantees the future, so always keep this back of mind.
Charting & analysis software
The favoured tool of the technical trader, charting and analysis software is many and vary, so take your time before launching into a purchase. Software will vary on the number and range of indicators and line studies offered (customisation is important), as well as the type of charts offered. The ability to view charts across various intervals - anywhere from 1 minute to 2 hours - is particularly handy. Most packages also include data scanning functions.
Portfolio management software
Portfolio Management software is a godsend at tax time. It is a far cry from a shoebox, or the top drawer and can quell those troubling thoughts in the middle of the night: How much brokerage have I forked out this year? What on earth did I sell those Telstra warrants for back in March? Where are my CBA dividend receipts?
Advanced portfolio management software will manage just about anything, from bonus and rights issues on shares, to reporting on trusts and foreign investment income such.
If you intend to buy charting software as well, remember to enquire as to whether your preferred portfolio management software is compatible with the respective charting package because if so, you will be able to download prices from your charting packageand insert theminto your portfolio.
All-in-one software
If you are just starting out, and haven't yet invested in any software, then all in one packages - that incorporate charting and analysis as well as portfolio management - might be preferable to buying packages separately. It will ensure compatibility between function, and means that you only deal with one supplier.
Data feed
Remember that you need a data feed, which might be part of a package or, more often than not, for an extra monthly fee. The data might be real-time, end-of-day, snapshots, historical and even fundamental data. To check out what's available go to our software comparison tables.
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