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Day Trading Software: Get the Scoop

Advanced technology has made automated trading easier than ever, especially when it comes to short-term trading like day trading. As day trading becomes more popular, so does the use of day trading software. The practicality of day trading software is questioned sometimes due to the brokerage fees and commissions involved. For this reason, it’s essential to have a solid understanding of day trading software so that you can choose the one that works best for you.

Here are the key takeaways when it comes to choosing the right day trading software:

  • Develop a solid understanding of day trading software.
  • Know the different types of software.
  • Determine the features and functions you need.
  • Read the reviews for well-rated day trading software.

What Is Day Trading Software?

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To start, let’s define day trading.

Day trading is a time-sensitive trading activity where buy and sell positions are opened and closed within the same trading day. The goal is to make a profit from small price differences on larger volume orders by quickly buying and selling.

Day trading software is a computer program that’s usually provided by the trader’s brokerage firm. The purpose of the trading software is to help traders perform their day-trading activities efficiently. The software can run analysis and enter trades that would be difficult for traders to do themselves manually.  For example, it would be pretty challenging for a trader to track multiple technical indicators on multiple stocks over multiple markets. However, with the right day trading software, the application can perform these actions easily and then enter a trade assuming the given qualifications have been met.

Different day trading software usually comes with varying features and functions. Traders can usually acquire day trading software through brokers if they have one, or through independent vendors. Typically, independent vendors offer trading software with more advanced features.

Whether you’re new to day trading or are already a skilled trader, it’s vital to do some solid research to find the day trading software that’s right for you. Skilled traders can typically make do with simple software, but beginners will have a greater chance at success if they utilize all the advantages available through day trading software. While we aren’t stockbrokers and don’t make recommendations, many believe that beginners can benefit from equipping themselves with solid trading software, scanning software, and charting software.

How Day Trading Software Works

Most day trading software includes at least three basic features:

  • Operations that allow the trader to designate a trading strategy based on news, signals, technical indicators, or pattern recognition.
  • The ability to automatically enter a trade when it meets the set criteria.
  • Analytical tools and features that run assessments on market changes and any current holdings, and then act on those analyses accordingly.

Before the day trading software can do its thing, the trader needs to establish a trading strategy, set limits, and place the software on live data. Once this is done, the day trading software is ready to start trading.

Here’s a simple example of setting up a trading strategy with day trading software. Let’s say that stock XYZ is available on two different markets, and the trader is looking for profitable arbitrage trades. The trader would make the following steps to set up an automated strategy:

  1. Select stock XYZ for arbitrage and then the two markets wanted for trading.
  2. Set the price differential requirement. For example, if the brokerage fees and commission are 5 cents per share, the trader would likely set the price differential requirement for 15 cents or greater.
  3. Establish the number of shares for the software to buy and sell in one order.
  4. Allow the new setup.

Once the setup is live, the trading software has the ability to initiate trades according to the given criteria automatically. For example, say stock XYZ is $43.20 on one market and $43.40 on another, giving it a 20 cent price differential. The software will enter orders to buy the lower-priced stock and then sell the higher-priced stock. Let’s say that the set number of shares for one order is 10,000. Assuming all goes as planned, the software would easily earn the trader a net profit of $1,500.

More advanced day trading software might also include other enhancements like stop-loss features. For example, if the software enters the buy trade but not the sell trade, the trader could set up one of the following advanced options:

  • The software can continue to look for sell trades at the specified prices for a certain amount of time. If nothing comes up on time, then the software will reverse the transaction at a loss.
  • Establish stop-loss limits and reverse the buy order if the limit is met.
  • Opt for an averaging strategy where the software purchases more positions at lower costs to minimize the overall price.

Types of Day Trading Software

There are a few different types of day trading software:

  • Scanning software.
  • Charting software.
  • Breaking News software.

Scanning software helps the trader locate profitable stocks to trade. Depending on the software, traders can opt for predefined searches or custom build their own using various filters that tell the scanning software exactly what to look for.

Day trading charting software provides traders with high-quality charts. Usually, basic charts come with a broker; however, some traders prefer more advanced charts that allow them to create their own formulas.

Breaking News software gives traders a better understanding of why a certain stock is moving in the market. Stock prices can move for a variety of reasons. Sometimes they move in unison with the market because of a strong sector or due to a more rare catalyst such as earnings. Some catalysts are stronger than others, so it’s helpful for traders to understand why a stock is moving.

Features of a Good Day Trading Software

The following are a few key features that day traders want to consider when looking into day trading software:

  • Low brokerage fees and commissions.
  • Thorough and reactive software.
  • Minimum account balances.
  • Advanced features and tools.
  • Mobile compatibility.

The first thing to look at when choosing day trading software is the brokerage. Day traders make a lot of trades each month, sometimes up to 10 trades per day. With so many trades, it’s important to pay close attention to brokerage fees and commissions. A difference as small as a couple of dollars in commission prices could significantly impact traders’ profits when making multiple trades each day.

Next, traders want software that’s thorough and reactive. Day traders make a profit by responding quickly to movements in the market, so they need their software to be able to move quickly and efficiently to buy and sell positions in a profitable manner.

Another feature of different trading software is the minimum account balance. Not all, but most trading software has a minimum balance. The minimum balance for standard accounts might be $500, while professional trading software might have a minimum balance of $10,000. Traders need to make sure they have enough capital to cover the minimum balance before investing in the software.

Day trading software can offer various features and tools, such as market analyses, news on market movement, and professional editorials. Top day trading software also features daily news and research covering multiple industries and types of assets. This gives the trader a better overall picture of the market each day.

If a trader is regularly away from home, another feature that might be important is mobile compatibility. This allows traders to easily keep an eye on their day trading software at all times.

Highly Rated Day Trading Software

Before investing in day trading software, traders should compare platforms and read reviews. Again, we don’t make recommendations, but the following are some of the more popular and well-rated trading software out there:

  • NinjaTrader.
  • TD Ameritrade.
  • Linux software.
  • AlgoTrader.
  • MetaTrader.
  • JSE software.
  • TradingView.
  • MCX analysis software.
  • Etrade software.
  • eToro.
  • Consors software.
  • ZuluTrade.

Day trading software can be a helpful and profitable tool for traders, especially day traders, to acquire, but it’s important to do some extensive research into the different trading software before making a commitment. Things to consider are costs, features, tools, efficiency, and reviews.