When you hear the words stock trading software what do you think of first? When I get that question I have to always say, “It depends.”
Is it a computer program that generates buy and sell signals that you follow without knowing what the rules are that issue the trades? If so you are using a “black box” trading program and since you don’t know how the system was programmed you are at the mercy of the developer as to the effectiveness of the system.
While “black box” stock trading software can be robust I usually steer clear of anything that is kept secret from me because for all I know it is s simple coin flipping program that determines buy/sell signals.
Maybe to you a stock trading software program does disclose some of the rules used in the calculations but the “secret sauce” remains a mystery to all but the programmer. These are called “gray box” trading systems and once again I tend to shy away from these.
Stock trading software can also mean a program that fully discloses the rules used in the algorithms and these are the best types for anyone wanting a mechanical trading system because they can analyze and sometimes improve the system. It is also easy to check if a system has been over optimized by doing your own independent back testing.
A stock charting package that allows you to plot trend lines and indicators like a moving average or MACD are also a form of stock trading software and some times these charting packages incorporate a system module that you can use to program your own trading systems and test them. MetaStock is a good example of this type of program.
Other stock trading programs are built to run multiple systems on massive numbers of stock symbols to try and isolate good trading candidates. OmniTrader is my favorite program for this type of trading.
Finally, there are some high-end programs that are built specifically for testing systems. These programs feature extensive back and forward testing capabilities as well as more complex functionality like out-of-sample data testing and Monte Carlo simulations. These usually require some degree of technical knowledge and are not geared towards the beginner or casual trader.
Stock trading software also comes in a range of prices from free to thousands of dollars and price alone should not be used to determine the overall quality of any software. I will say that free software can be good but it is nowhere near the level of software that you pay for.
On the other hand, I have seen some very expensive software programs that I felt were way overpriced particularly those that are complete rip-offs that are constantly being foisted on the unsuspecting public.
This is the type of stock trading software that most people think of, the kind that promises a simple, fast “push button” way to make money in the stock market.
Of course the reality is that these programs don’t work and the simple reason is if trading were that easy everybody would be doing it.
