Technical analysis software
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Please see the discussion on the talk page. This article has been tagged since March 2007. |
The following are descriptions of the most common features of technical analysis applications. Take note that some software may focus on only one aspect (say back testing) and the combination of more than one software is often required to build a fully automated trading system. When selecting a technical analysis software package, consider where and when you are going to use it, what type of data feed you require, and the type of technical analysis indicators that you like to use.
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[edit] Description of Technical Analysis Software Features
[edit] Charting
A graphical interface that presents price, volume and technical analysis indicators through a variety of visual interfaces such as line, bar, candle stick and OHLC (open high low close) charts. The chart data is presented as a time series and users typically have the ability to view historical data with varying interval (sampling) periods. Interval periods range from seconds through to months; short term traders tend to use frequent interval periods, such as 1 minute i.e. the price data is updated every 1 minute, whereas longer term traders tend to use daily, weekly or monthly interval periods when trying to identify price and technical analysis trends. Some charting packages enable users to draw support & resistance trend line or for example fibonacci retracements to help establish trending patterns.
[edit] Back testing
Enables traders to test technical analysis investment timing strategies against historical price movement for a specific stock(s). Strategies are compared to each other using diverse performance measurements such as maximum drawdown, annual profit and Sharpe ratio. The objective is to try and develop a technical analysis trading strategy based on technical analysis indicator criteria, which will generate a positive return.
[edit] Optimisation
Is a process of testing technical analysis indicator parameters, with the view to developing an investment strategies that generates the maximum return based on historical price movement. The optimisation process is achieved through the fine-tuning of the associated technical analysis charting parameters. Typically technical analysis indicators have a range of parameters that can be adjusted, such as the interval period and the technical analysis indicator variables. For example the Stochastic indicator has four parameters that effect its results: %k, %d, slowing period, interval period. Optimisation must be performed carefully to avoid curve fitting. Back testing of an over-optimised system will perform admirably with past data because it becomes a good approximation function that fits the past data, however it is not uncommon to see a lesser performance when evaluated in real-time. One way to diminish over-optimisation is by carrying out optimisation on historical data and then performing future testing (sometimes referred to as 'out of sample') before making a final evaluation of a trading strategy.
[edit] Scanner
Scanners enable users to 'scan' the market, be it stocks, options, currencies etc, to identify investment opportunities that meet a user's specific investment criteria. Using a technical analysis scanner, you could for example scan the market to identify oversold stocks that have stochastic and RSI value of less than 20% and 30 respectively.
[edit] Alerts
Alert software is used to monitor specific equities, such as stocks, options, currencies, warrants etc and provide a notification of when specific price, volume and technical analysis investment conditions are met. As an example, a person who uses technical analysis might want to be notified when the RSI indicator rises above 70, followed by the price falling below its 20 day moving average; using alerting software the user will be able to create an alert, which will provide a notification of when the technical analysis investment conditions are met. When alert conditions are met, a notification is typically communicated via an on screen pop up or sent as an email, instant message or text alert (to a mobile phone).
[edit] Custom Indicators
Some technical analysis software provide pre-defined scans which can be limiting. Custom indicators enable the user to create their own technical analysis investment rules and scan for investments that meet their criteria. Script based solutions typically use a proprietary software language, whereby the user has to write a program. 'Point & Click' graphical user interface solutions, do not require an ability to program. Scripting languages typically provide the user with greater flexibility, however the user requires a strong programming knowledge base. Icon based approaches enable users to more easily set up scans without a knowledge of programing, however programmers may not have the same level of flexibility for testing complex strategies.
[edit] Data Feed
Technical analysis software is typically used with End Of Day (EOD), delayed or real time data feeds. EOD data feeds provide the end of day closing price for the given equity and is typically updated once a day at market close. Delayed data is typically delayed 15 to 30 minutes depending on the exchange and is the most commonly used data feed type. Real time data feeds provide tick by tick 'real time' data. Real time data is licensed on a per-exchange basis whereas delayed data is typically purchased on a regional basis, such as US markets, rather than an exchange basis.
[edit] Broker Interface
Some technical analysis software can be integrated with brokerage platforms to enable traders to place trades via a user interface that they are familiar with. Typically these software providers try to differentiate themselves from the brokerage software through enhanced features such as automated trading.
[edit] Online / Download
When selecting a technical analysis software solution consider when and where you are going to use it. Technical analysis software solutions are typically delivered via software downloads and only work on limited operating systems, such as Windows, Linux or Macs. Download paid for services typically restrict the number of 'installations' that you can make therefore you may not have the ability to access your technical analysis software if you are away from your PC. On-line solutions provide access from any computer that has a web browser, however their use is restricted or not available if you are off-line.
[edit] Mobile Phone / PDA access
Mobile phone or PDA devices can be used to access some online technical analysis applications when away from your computer. Online technical analysis software with Java Applets typically do not work on mobile phones or PDA.
[edit] Open Source
Open source solutions enable you to carry out custom development of technical analysis trading features. These guys are making a significant contribution to making technical analysis tools available to all.
[edit] Feature comparision of Technical Analysis Software
[edit] See also
| Charting | Back Testing | Optimisation | Scanner | Alerts | # Built-in Indicators | Custom Indicators | Data Feed | Broker Interface | Online / Download | Mobile Phone / PDA access | Open Source | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AmiBroker | Yes | Yes | Yes | Yes | ~100 | Yes | EOD, Delayed, Real Time | Yes | download | No | No | |
| Axial Finance | Yes | Yes | Yes | Yes | Yes | 80 | Yes | EOD, Real Time | No | download | No | No |
| ChartAlert | Yes | Yes | No | No | ~100 | Yes | EOD | No | download | No | No | |
| MarketFilters | No | Yes | No | Yes | ~50 | Yes | EOD, Delayed, Real Time | No | online | No | No | |
| Metastock | Yes | Yes | Yes | Yes | Yes | ~200 | Yes | EOD, Delayed, Real Time | Yes | download | No | No |
| Merchant of Venice | Yes | Yes | Yes | No | 7 | Yes | EOD | No | download | No | Yes | |
| Qtstalker | Yes | Yes | No | Yes | ~130 | Yes | EOD | No | download | No | Yes | |
| StockWrap | Yes | No | No | Yes | 130 | Yes | EOD, Delayed, Real Time | No | download | No | No | |
| TA-Lib | No | No | No | No | No | 125 | No | No | No | download | No | Yes |
| TeleTrader Professional Workstation | Yes | No | No | No | 150 | Yes | EOD, Delayed, Real Time | No | download | No | No | |
| TradeStation | Yes | Yes | Yes | Yes | ~100 | Yes | Real Time | Yes | download | No | No | |
| Telechart | Yes | No | EOD, Delayed, Real Time | No | download | No | No | |||||
| TimeToTrade | Yes | No | No | No | Yes | 9 | Yes | EOD, Delayed | No | online | Yes | No |
