Day Trading Software: 6 Things you need to know
Calm down, when we say speed we are not talking about the setup many prop firms have in New York where they try to setup their server farms less than 100 yards from the exchange for an edge. We are just saying that the platform needs to allow you to run all of your intra-day scans as well as all of your charts. I distinctly remember a time when I was using a particular platform (omitting the name to avoid bashing) where I had up ~20 stocks and this load on their program brought my computer almost to a halt. I ended up having to reduce the number of stocks in my watch list in order to prevent the frequent occurrence of the screen locking up while I was trying to place an order.
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Lessons Learned: If you pick trading software that slows down your machine, it will generate an awful user experience and you run the risk of the financial impacts of not being able to enter/exit trades.
2. Free stuff isn’t 100% free
Last time I checked everyone loves free and day traders are no different. Trading software companies always try to woo you in the door with all kind of offers. This could range from 30 days of free trading, to my personal favorite the cash bonus if you fund an account with a certain dollar amount. Now I want you to think back over your life and ask yourself why anyone would give you something for free, not including your parents? Well doesn't take long to realize that these are offers to get you in the door and hooked on a particular platform. Who has time to close out an account and go through the painful process of completing all of the paperwork, transfer of funds, etc. etc. The brokerage firms know that if they can get us hooked, we will likely stay with them out of comfort vs. necessity.
Lessons Learned: Things may look free and fun initially but always remember to pick your platform based on your trading style and habits and less on the quick thrill of a few free bucks. You have to remember if the brokerage firms are willing to pay you hundreds of dollars to use their platform, they clearly plan on making thousands off of you in commissions whether you succeed in trading or not.
3. Platforms with 50k features, none of which you know how to use
How many of you can look at the image to the left and feel comfortable with the amount of data on display? If you say yes, please do me a favor and slap yourself. You officially have the early signs of the analytical mind on steroids. Features and widgets in day trading platforms are like a virus. Features are like a virus. These platforms start out with a few add-ons, but over time these balloon into hundreds of useless features. You the newbie and or frustrated trader take comfort in all of these bells and whistles. Hell if you are looking for something and there are 200 options, odds are you will find something that you think you are looking for. Well platforms are no different. If you are getting hammered in the market using oscillators, well you will talk yourself into using the new visualization board which shows all of the buy and sell orders with bright lights. Do you get it? There are no magic bullets and you don’t need 300 indicators, CNBC streaming into your screen or feedback from the other 50k traders in the community that don’t have a clue. Focus on a few things that work and maybe get 1 or 2 mentors, who are actual people you know making a full-time living as a trader.
Lessons Learned: It's not important that your trading platform have 60 technical indicators. The more indicators and windows you add to your screen the greater the chances are these tools will conflict with each other only further complicate things. Make life easier on yourself and go with a platform that has a great user experience and leave all of the complicated trading platforms to people who would rather talk about their multiple trading screens vs. make money.
4. Back testing your Strategies, is all of this necessary?
I am personally over the idea of back testing. Now it is worth noting that anyone should research and look at the potential positives and negatives with any trading strategy. The problem I have with back testing is people will undoubtedly go from testing a very simple strategy to sitting in front of their machine and writing the perfect line of code that will produce perfect results. aSo, you start out with a basic simple moving average crossover strategy where you look at the markets movements over the last 2 years. While your strategy is profitable, you find 5 cases where the draw downs were 20% or more. In true form you make a few tweaks to your code to address these issues and viola you have an automated strategy with a 90% win ratio. You then take this lovely model and apply it to the real-world only to realize it doesn’t work. I'm not making this up here. This literally happened to me during the mortgage crisis where I back tested strategies all the way back to the '87 crash, but the market produced swings during the '08 crisis that were simply unprecedented.
Lessons Learned: Imagine what happens when you apply these automated rules to shorter time frames (i.e.1, 3 or 5 minute charts). Do you think these systems will work for months or years? If you are day trading each day presents different opportunities best suited for a particular type of trader (i.e. breakout trader,
5. Why do I have to pay for data, isn’t the platform fee enough?
You have to love these Wall Street types. So you pay for the software outright let’s say 2,000 dollars to gain access to a license. Like you I’m thinking, 2k dollars is more than enough. Hell, that’s more than a tv, a great suit or a crazy weekend in Vegas. Yet after you purchase the software you will quickly notice your charts are blank or only have a fixed number of days worth of data. You then quickly realize your loving IT company that just sold you the best trading platform is now telling you that you need to fork over another 50 bucks a month. Now of course part of this are exchange fees for the data, I mean capitalist aren’t into giving away the data for free, but you still need t0 of course pay your friendly trading software developer another 30 bucks for him to pass you the data. Oh, when does it ever end.
Lessons Learned: When you purchase a trading simulator make sure you consider if the data is provided in your fee.
6. How is every platform the best platform for the year?
Have you noticed that every platform is the best in some obscure category. This is the beauty of certifications. Just to rattle off a few there is :
- Best Real-Time Data
- Best Professional Platform
- Best for Frequent Traders
- Best for Options Traders
- Best Research and Tools
- Best Investment Choices
Unless you know exactly which award means the most to you what does any of it mean?
Lessons Learned: So, over the years what I have come to believe is that people end up picking their platform based on what pretty much where they land first. A platform is much like a daily routine. Once you have become accustomed to the ritual of life you begin to just get used to your platform.