Trading Software Meaning Types Examples
Trading Software: Meaning, Types, Examples
Trading software facilitates the trading and analysis of financial products, such as stocks, options, futures, or currencies.
A wide variety of trading software packages are available for all levels of trading experience and different markets (e.g., stocks vs. forex).
Key Takeaways:
– Trading software is used for electronic trading and analysis of securities.
– Self-directed traders need to effectively use their trading software in addition to learning how to trade or invest.
– Common features of trading software include order placement, technical analysis, fundamental analysis, automated trading, and paper trading.
Understanding Trading Software
Brokerage firms provide trading software to place trades and manage accounts. The software may be downloadable and launchable from a desktop or mobile device, or web-based.
Traders can also purchase third-party trading software that supplements or enhances the software provided by brokerages.
Due to falling commission costs, more traders and investors have moved to doing some of their own trading and analysis using self-directed trading accounts. This increased the demand for software that provides trading capabilities, as well as analysis and information resources.
Trading software provides users with pricing information, special order types, fundamental data, charts, technical analysis indicators, statistics, chat rooms, and other proprietary tools or functions.
Application programming interfaces, or APIs, have helped fuel the trading software industry. APIs allow two or more pieces of trading software to be linked up, functioning as one. This allows users to access the benefits of multiple pieces of software.
Types of Trading Software
Different types of trading software with various features are provided by brokerages and third-party developers.
Some common features include:
– Placing trades: Most trading software has the ability to place market orders, limit orders, advanced order types, and view real-time quotes and the Level 2 order book. Some software also tracks trading statistics.
– Technical Analysis: Most trading software includes interactive charting capabilities, chart patterns, and technical indicators.
– Fundamental Analysis: Some trading software provides access to fundamental information, financial statements, analyst ratings, and other tools for due diligence.
– Programmatic Trading: Advanced trading software enables traders to develop and execute trading systems automatically. It may also provide backtesting functionality.
– Paper Trading: Some trading software allows riskless no-real-money trades, known as paper trading. Traders can test their skills before committing actual capital.
Choosing Trading Software
Before deciding on trading software, traders and investors should consider the features they need. Active traders and investors may choose different trading software.
Software applications may have different fee structures, performance characteristics, and other factors that impact profitability.
Potential clients can test out software before buying or opening an account. Try out several pieces of software, weigh the pros and cons of the broker (if applicable) and their commissions.
If you like a particular broker but don’t like their software, you may still be able to find third-party software that you can use through an API or independently.
For example, if you don’t like your broker’s charting capabilities, you could subscribe to a third-party charting service/software and utilize that with your broker’s trading capabilities.
Examples of Third-Party Trading Software
Most brokers have their own trading software, but some provide third-party software. For example, in the forex industry, many brokers offer MetaTrader4 and/or MetaTrader5, which is a commonly used third-party trading platform.
In the stock market, most brokers provide their own software. Here are some large brokers and their software:
– Fidelity: Active Trader Pro
– Interactive Brokers: TWS (Trader Workstation)
– Charles Schwab: Streetsmart Edge
– TradeStation: TradeStation
– TD Ameritrade: thinkorswim
– There are also several widely available third-party software and trading platforms.
The NinjaTrader platform provides charting, analysis, and trading capabilities and can be linked up with several brokers.
TradingView and StockCharts provide technical and fundamental charting tools, which can supplement the charting capabilities provided by trading platforms.
