Analytical tools. Why should they be used by traders

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What are analytical tools for a trader?

Successful traders make forecasts of changes in rates, analyzing the graph of the selected asset. The study of behavioral factors of price movement is the basis of technical analysis, and various analytical tools help to structure the data obtained.

Practice shows that many novice traders do not pay enough attention to technical analytics, relying entirely on another type of analysis – fundamental. They follow economic news and try to recognize signals in various events.

Fundamental factors have a significant impact on the market and their study is also the key to successful forecasting, helping to identify emerging trends. But often it is the technical picture of the schedule that determines the priority direction of the course in the short term.

What analytical tools are used in profitable trading?

Before you start investing your own money in market speculation, it is recommended that you familiarize yourself with the basic principles of technical analysis. Having a basic knowledge, a novice trader will be able to improve trading skills faster and more efficiently, while gaining profit from the conclusion of transactions.

Technical analysis combines a huge number of tools. These include charts, indicators and oscillators, systems, volumes. What affects the current asset rate is in the history of the chart, and it is constantly repeated. The reversals and rebounds that occur regularly are the result of cyclical actions by market participants.

The main analytical tool of a trader is a chart. It is he who shows us how the price has changed, and, studying its history, we make predictions of price changes. The reversals and rebounds that occur regularly are the result of cyclical actions by market participants. Visually, the graph is constructed in four main types:

Most traders choose the last type of charting – it is he who most clearly shows the history of price behavior. Each candle is a price change in a selected period of time, from one minute to one month. The body of the candle shows the range of opening and closing, and its shadow is the minimum and maximum price within a period.

Where to follow the charts of changes in exchange rates of assets?

Binarium trading platform provides high-quality service for analytics of more than 30 trading assets. In addition to this, the company’s clients have the opportunity to open transactions based on their forecasts and receive a fixed profit for it.

Transactions are opened for a specific period – from one minute to three months. The task of the trader is to predict how the chart will behave over the selected period of time, go up or down relative to the opening of the transaction.

A set of analytical tools integrated into a trading terminal helps in forecasting. These tools are universal for all analytical services – on their basis numerous trading systems are built. In more detail we will tell about them further.

Binarium also has its own unique developments that are indispensable in analytics and help to make even more profitable deals. For example, “Trading Room”, in which a professional trader gives signals, supported by technical and fundamental analysis. And the Binarium “Trends” application helps a trader save time, which is usually spent on finding market trends, and start trading one-click trend strategies.

Each new client receives a reward from the company – when crediting a trading account, he receives a bonus of 100% of the deposited amount. A big bank is a guarantee of comfortable and successful trading. The withdrawal of earned funds is carried out on the most popular payment systems, including bank cards of Visa / MasterCard systems.

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Trend as the basis of market analysis

One of the main advantages of using analytical tools is the ability to predict the behavior of a chart in small timeframes, down to the minute. Technical analysis, coupled with a fundamental study of the market, is becoming a powerful weapon in the hands of a trader.

The movement of the chart always happens in a certain direction, which is called a trend. It is ascending or descending. Most trading systems are built on trends. If we look at the long-term chart, we can see the general trend, while in the short-term periods it consists of small trends. When there is no clear trend on the chart, the movement of the chart is called sideways.

An indispensable tool for detecting a trend on a candlestick chart is a moving average (moving average). It shows the average value of price changes. There are several types of moving averages: MA, SMA, EMA, etc. Different types of instruments are used in various trading systems – from one moving average to several at a time (there are indicator strategies with more than 5 types of MA).

How to use lines on charts?

The basic analysis tool is the lines that are plotted on graphs. Each trading terminal is equipped with this tool – most often it is put on maximum candles in order to identify how the price will move in the future, as well as to determine the moment of the trend reversal.

The lines also indicate the channel in which the price moves. The direction of the channel determines the trend, it can go up, down or in the horizontal direction. Exiting the channel is a signal of an emerging trend, a reversal of the current or price rebound. It all depends on the situation.

Another purpose of the lines is the designation of support and resistance levels. The lines go in relation to the levels from which the price rebounded. The resistance line goes above the candles – it resists growth, not allowing the price to go beyond the designated mark. Accordingly, the support line, on the contrary, does not allow the price to fall below.

These levels have psychological significance for bidders. No one wants to buy assets at too high prices and sell at too low. Until the market gives a signal to action, then the price breaks through the level, and in the future it will have to look for new points of support or resistance.

Psychology of traders and support / resistance levels

Psychological marks are another important part of a competent analysis. These marks are at levels with round numbers – 10, 50, 100, etc. The closer the price is to the psychological mark, the more active the traders are selling or buying assets.

For example, the dollar at the opening of trading was 65.35 rubles. The factors positive for the Russian currency determined the intraday trend, and the dollar began to fall in price, approaching 65.00. Somewhere around 65.05, traders are beginning to actively buy US currency, as they are confident that the rate will not fall below an important psychological barrier. As a result, the price rebounds and there is a trend reversal within the day – the dollar is rising. Exactly the opposite happens with the psychological level of resistance – the price approaches the round mark, but does not break through it, instead it rebounds and goes down.

Support and resistance levels, under the influence of various factors, are always punctured. Then there is a change of roles – if support has been broken, then in the further movement of the chart it becomes a resistance level, and vice versa.

Do not forget that “false breakdowns” occur on the charts, when the price managed to go beyond the channel, but there was not enough power to develop the movement, and it rolls back to the previous range.

It is economic news that most often causes breakdown of support or resistance levels. The emotional component of the bidders is very important, so the loud events in the global economy and geopolitics are able to stir up even the most tranquil segment of the market.

Technical Analysis Indicators

Having dealt with the schedule, moving averages, trends, lines, levels of support and resistance, you should proceed to the study of indicators of technical analysis. This analytical tool helps to work better with the history of the graph, but in no way case is a panacea in forecasting.

The most popular indicators are oscillators. They have a scale from 0 (oversold asset) to 100 (overbought). These values ​​allow you to expect an asset to rise or fall.

There are a huge number of indicators, the most popular of them are:

в—Џ ADX – determining the strength of the trend;

в—Џ RSI – determining the strength of the trend and the probability of a reversal;

в—Џ MACD – effective for receiving signals at the intersection of moving averages;

в—Џ Stochastic – shows the ratio of the current price to the price range of a certain period.

Experienced traders use on an ongoing basis only 1-2 of their favorite indicators. At the same time, newcomers sin by putting several indicators on the chart at once, which is why it becomes similar not to an analytical tool, but to a New Year tree. Many people go through this, and, in the end, select for themselves the optimal arsenal of analytical tools for making successful deals.

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”

5 Tools for Stock Traders

The days of reading stock quotes in the newspaper are long gone. Now, stock traders get streaming quotes on their smartphones, buy stocks via those phones or advanced trading platforms, and get company news and updates via Apple Watch alerts, chat rooms and Twitter.

Bottom line: If you’re not taking advantage of stock trading technology, you’re missing out. The following tools can streamline your process, improve your research capabilities and (possibly) boost your returns.

1. A strong trading platform

Choosing a broker with a robust trading platform is step one, and it can be a tricky balance: Often, brokers with advanced trading platforms have higher trade commissions or require a minimum number of trades or minimum account balance to access the platform.

There are, however, some clear winners here: TD Ameritrade leads the pack with its thinkorswim and TradeArchitect offerings, both of which are available to all customers (though the broker’s trade commissions are on the high side at $9.99). OptionsHouse also has strong trading tools and charges half the commission at $4.95 per trade. And for advanced traders, Interactive Brokers has a well-regarded platform and low per-share commissions, though the broker does impose monthly trade minimums.

See our round-up of the best brokers to compare more options.

2. A mobile trading app

If you’re serious about trading, you’re going to want the ability to do it on the go, which means choosing a broker with a strong mobile trading app. These apps range from bare-bones — the ability to execute basic trades and view quotes — to near mirror images of a web or desktop platform, with advanced capabilities like charting, complex options trades and screeners.

In our roundup of best investing apps, we picked TD Ameritrade and E-Trade as the winners for stock trading — both offer near-desktop trade capabilities on their mobile platforms. But if cost is your primary concern, Robinhood and Loyal3 are worth a look. Both services offer commission-free trading, though Loyal3’s selection is limited to around 70 blue-chip stocks.

3. Stock screeners

Stock screeners take much of the weight off the trader’s plate, allowing you to quickly search for a stock based on criteria you’ve defined, like market capitalization (in other words, the value and size of the company), dividend yield, industry or share price.

Most of the trading platforms offered by online brokers include a screener (and some brokers also have screeners for exchange-traded funds, mutual funds or options). But many advanced traders recommend Finviz, which has really in-depth screening capabilities that can help you dial down to trade opportunities. The site also offers charts, U.S. and international market maps and quotes. The basic services are free, but Finviz offers an elite subscription that starts at just under $25 a month.

4. Stock charts

Charting is integral for any trader who uses technical analysis, which involves evaluating past movements as a means to predict future performance.

Stock charts assist in that analysis by showing the performance of a security over time, allowing traders to recognize patterns and look at various technical indicators. Users can use charts to dig into a stock’s history and recognize volatility, as well as compare multiple securities and benchmark performance to indexes, like the S&P 500.

Online brokers offer charting capabilities that vary in depth; outside resources include websites like TradingView and StockCharts.com, which both offer a number of free features as well as upgraded memberships. StockCharts.com offers a ChartSchool to get new users familiar with charting.

5. Idea-generation tools

There are a lot of ways to come up with trade ideas, including subscription-based services. Briefing.com is one of the most popular, offering everything from live market updates to initial public offering previews to emerging growth stock opportunities. Another service, Seasonalysis, identifies seasonal stock trends.

The other way traders research a stock is through fundamental analysis, and that involves digging into financial statements, company news and outside research reports written by professional analysts. When you do this, you get a clear picture of how individual companies and industries are doing, and that can lead to trade ideas.

Brokers often provide this information from third-party sources; the more research available, the better. Fidelity in particular is known for its breadth of research.

This post was updated on 9/30/2020.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: [email protected] . Twitter: @arioshea .

Warrior Trading Blog

  • Ross Cameron
  • Day Trading
  • Blog Posts

Many new traders make the beginner mistake of using the wrong tools. Using the right day trading software and day trading tools is critical to your success. While a skilled trader can make do with less than ideal tools, beginner traders need every advantage possible.

That means making sure your equipped with the best trading software, scanning software, and charting software.

I often talk about trying to ride a road bike in the sand. It doesn’t matter if you have a $2,000 road bike, you can’t ride a road bike in the sand.

If you ride a $200 used beach bike with fat tires you will have a great time! The guy on the road bike will wonder why you are making it so easy.

It’s because you are using the right equipment for the environment. It’s not about how much money you spend, it’s about using the right tools. Make your life easier by using the best tools below.

Day Trading Software

There are a few different items you will need for day trading including:

  • Online Broker
  • Scanning Software
  • Charting Software
  • Breaking News Software

Below we will dig into our favorite day trading software, why we use them and why we think they are crucial for traders to have!

Online Broker: Lightspeed Financial Broker

There are hundreds of brokers you can choose from and they all provide traders with a different experience.

Generally I group brokers into various categories depending on what services they provide or what financial instrument they specialize in. There are options, forex, stocks, long term investing, and scalping brokers.

For active day traders we need a few things, hot keys, direct access routing and fast executions.

For these reasons I use Lightspeed and consider them the best broker and one of the best tools for any trader.

If you are trading with a $500 trading account, CMEG (Capital Market Elite Group) is the next best thing! They allow unlimited day trading with a $500 min balance (NO PATTERN DAY TRADER RESTRICTIONS)

Stock Scanning Software: Trade-Ideas

Now that you have your broker funded you are ready to start trading! You need a way to find stocks to trade. Based on my Gap and Go and Momentum trading strategies there are only a few stocks worth trading on any given day.

Knowing how to identify those stocks before they make the big move is what separates the most profitable traders from everyone else.

I use Trade-Ideas for all my stock scanning software. You can use their predefined searches to see HOD movers, Volume spikes, Biggest Gainers/Losers, Turbo Breaks, etc.

Or you can do what I’ve done and build custom scanners using their set of hundreds of filters to tell the scanners exactly what you want to see.

Do you like trading Bull Flags? No problem. Flat Top Breakouts? Easy. There is no software in the world that can scan the market and find winning stock setups better than Trade-Ideas.

Charting Software: eSignal Charting

Okay so you have your broker, you’re all setup with Trade-Ideas, but you are ready to get some really high quality charts. You can use the charts that come standard with your broker.

Those will work for a while, but eventually you may want to take it up a level and use charts that allow you to draw and write custom formulas.

This is where eSignal comes into play. For a long time I used TC2000 for my charting, but when I added more monitors TC2000 was just too slow. eSignal allows me to easily run charts on 8 monitors without any lag time (check out how to set up a trading computer).

This is pretty impressive. And for me it’s important because I like to keep an eye on several stocks at once. In addition to being fast and reliable, eSignal allows you to install custom scripts. I use these as custom indicators for reversals, and automatically drawing support/resistance lines.

Breaking News Provider: Benzinga

As you’ll learn in our Day Trading Courses, each morning we start the day with a review the stocks gapping up on our Trade-Ideas scans. From there we have to look for the news catalyst, the reason why these stocks are moving higher.Sometimes they are moving in sympathy with the market or a strong sector, but other times they have a unique catalyst like earnings.

Understanding the reason why a stock is moving is important because some catalysts are stronger than others! I use Benzinga Pro to search for the latest headlines. Then during the day I listen to the Benzinga Pro Radio.

They read the headlines and let us know when stocks are spiking, breaking news reports, etc. This breaking news feed has made me over $4k in the last two news trades alone (see $WATT and $MBLY).

TAS Market Profile

TAS Market Profile is one of the best day trading software programs on the street. There are a couple different packages you can choose from depending on what you are looking for.

They have a TAS Indicator Suite that offers 7 of their proprietary indicators including: TAS Market Map, TAS Boxes, TAS Vega, TAS Navigator, TAS Ratio and TAS Compression Levels.

I really like the TAS Market Map, TAS Vega and TAS Boxes for active trading and have found it to be of great value for making trade decisions.

They also offer TAS Scanner. This unique tool allows you to see stocks moving in different time frames with varying levels of buying or selling confidence at key levels. This is a powerful addition to your charting software and is something I use everyday.

The indicators and scanners work on a ton of different charting platforms including eSignal, Tradestation and Bloomberg. You can find a full list here.

We recently just joined forces with TAS Market Profile in order to get you the best value for your buck! Check out the following link for more information on how you can save on TAS Market Profile subscriptions!

Final Thoughts

Having the right tools and day trading software alone for online trading won’t make you a profitable trader but it will point you in the right direction towards success and make your life a lot easier.

Trading is one of the most competitive careers you can choose so don’t put yourself at a disadvantage or it could come back to haunt you!

From time to time we refer third-party products or services to you. We may receive compensation from those third parties whose products or services we refer, however, our reviews and recommendations are independent of any compensation we may receive. There is no obligation for you to interact or transact with these third parties.

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Warrior Trading may publish testimonials or descriptions of past performance but these results are NOT typical, are not indicative of future results or performance, and are not intended to be a representation, warranty or guarantee that similar results will be obtained by you.

Ross Cameron’s experience with trading is not typical, nor is the experience of students featured in testimonials. They are experienced traders. Becoming an experienced trader takes hard work, dedication and a significant amount of time.

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Available research data suggests that most day traders are NOT profitable.

In a research paper published in 2020 titled “Do Day Traders Rationally Learn About Their Ability?”, professors from the University of California studied 3.7 billion trades from the Taiwan Stock Exchange between 1992-2006 and found that only 9.81% of day trading volume was generated by predictably profitable traders and that these predictably profitable traders constitute less than 3% of all day traders on an average day.

In a 2005 article published in the Journal of Applied Finance titled “The Profitability of Active Stock Traders” professors at the University of Oxford and the University College Dublin found that out of 1,146 brokerage accounts day trading the U.S. markets between March 8, 2000 and June 13, 2000, only 50% were profitable with an average net profit of $16,619.

In a 2003 article published in the Financial Analysts Journal titled “The Profitability of Day Traders”, professors at the University of Texas found that out of 334 brokerage accounts day trading the U.S. markets between February 1998 and October 1999, only 35% were profitable and only 14% generated profits in excess of than $10,000.

The range of results in these three studies exemplify the challenge of determining a definitive success rate for day traders. At a minimum, these studies indicate at least 50% of aspiring day traders will not be profitable. This reiterates that consistently making money trading stocks is not easy. Day Trading is a high risk activity and can result in the loss of your entire investment. Any trade or investment is at your own risk.

Any and all information discussed is for educational and informational purposes only and should not be considered tax, legal or investment advice. A referral to a stock or commodity is not an indication to buy or sell that stock or commodity.

This does not represent our full Disclaimer. Please read our complete disclaimer.

Citations for Disclaimer

Barber, Brad & Lee, Yong-Ill & Liu, Yu-Jane & Odean, Terrance. (2020). Do Day Traders Rationally Learn About Their Ability?. SSRN Electronic Journal. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2535636

Garvey, Ryan and Murphy, Anthony, The Profitability of Active Stock Traders. Journal of Applied Finance , Vol. 15, No. 2, Fall/Winter 2005. Available at SSRN: https://ssrn.com/abstract=908615

Douglas J. Jordan & J. David Diltz (2003) The Profitability of Day Traders, Financial Analysts Journal, 59:6, 85-94, DOI: https://www.tandfonline.com/doi/abs/10.2469/faj.v59.n6.2578

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    Honest broker!

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