Computer applications made it easy to computerize trading, particularly for short term intensive activities such as day trading, by making the usage of trading software extremely popular. Also, the debate continues on the profit potential that could be practically derived from day trading activities, as commissions and brokerage are said to remove the major portion of available profit potential. Therefore, it becomes very important to choose the right day trading software with a assessment of its applicability to individual trading strategies/needs, cost benefit analysis as together with the functions and features you need.
Day trading is a time bound trading activity where sell or buy positions are closed and taken on the same trading day, with a intention to make profits on large order volumes and in smaller price differentials by common selling and buying, frequently on leverage.
Now, what is day trading software?
It is an automated computer program, generally provided by brokerage firms in order to help clients complete their day trading activities in a timely and efficient manner. They allow traders to collect profits that would be difficult to accomplish by simple mortals. To sow you on example: a day trader could find it impossible to track manually 2 technical indicators (such as fifty and two hundred day moving averages) on 3 different stocks of her or his choice, but an automated day trading software easily can do that and place trades after the set criteria is met.
The functions and features available could vary from one software to the next one and could come in different versions. Aside from brokers, independent vendors provide day trading software as well, which have a tendency to have more advanced features. If you are doubting your broker for any given reason you can chose one of many sites that can tell you is your broker legit or not. For example here is a scan of cherrytrade.
How this software works?
3 basic features of any day trading software include:
- Automated order placing function (frequently with Direct Market Access), after the criteria are met.
- Functionality allowing the setup of trading strategy that is based on technical news /indicators/ pattern recognition/ trading signals in the trading system.
- Analytical tools to carry on assessment of existing holdings if any market features and developments accordingly act on them.
Any day trading software will involve a one-time setup of trading strategy with setting the trading limits, and by putting the system on live data and letting it perform the trades.
One simple example. Suppose a stock ABC is dual-listed on both NASDAQ and NYSE stock exchanges. Now, you are looking for arbitrage opportunities and you find a day trading software available for it. So, you setup the following:
- You will select ABC stock for arbitrage and select 2 markets (NASDAQ and NYSE) for trading
- Supposing both legs of intraday trade costs you a total of 0.2 USD per share for commission and brokerage; you intend to look for price differentials between 2 markets in excess of that amount. You will set (let’s say 0.3 USD or maybe above) as the price differential –the software should execute an immediate sell and buy order only if the bid and ask prices on the 2 markets (NASDAQ and NYSE) are differing by 0.3 USD (or maybe more)
- Now, you need to set the number of shares to be sold and bought in one order (let’s say 10,000 shares)
Let this setup go live.Read More