When it comes to day trading stocks, it is important that the trader is capable of carrying out detailed technical analysis of stock charts. Technical analysis greatly helps traders to make crucial decisions of buying, holding, or selling stocks.
In this article, we’ll go over what technical analysis is, why it is important for traders, the best technical analysis software, and a few factors to take into consideration when selecting technical software.
What is Technical Analysis?
Technical analysis is a trading approach that traders and investors use to examine and forecast the future prices of securities by looking at historical things such as trading volume, price charts, movement, trends, and other factors.
In other words, this approach focuses on historical price movements to determine the current trading conditions and identify potential trading and investing opportunities in the market.
Technical analysts normally prize the current or historic price of a security as the best indicator of the future price of that security.
Unlike fundamental analysis, technical analysis relies greatly on past chart patterns and indicators to unearth the strengths and possible weaknesses of a security and predict trends in order to help traders and analysts decide whether or not a security is viable.
You can think of it like this: Fundamental analysis tells you what to buy, technical analysis tells you when to buy.
Why Technical Analysis is Important for traders
Technical analysis is important for many reasons, including helping traders determine when and where to enter a market, as well as when and where to get out.
Traders can also rely on it to identify:
- Stock value and ability compared to the overall market
- Past and present instability in stock prices
- Support and resistance levels
- Short and long term trends that will help you make informed investment decisions
- History of trading and volume levels
- Stock value and price fluctuations prior and after key events
What to look for in Technical Analysis Software
There is a lot of charting software available out there, that can assist you with technical analysis of stocks. However, it is important to spend some time deciding what you need from it.
Here is a list of things that you should look for in technical analysis software:
- Historical and real-time data
- Ease of use
- Customizable charts
- Scanning tools
- Analytical tools
- Live and breaking news
Best Technical Analysis Software
One of the most popular technical analysis software applications, and our favorite, eSignal offers the best charting platform for advanced and professional traders.
eSignal is a fast, responsive, and stable platform that gives you everything you need, all in one place. It has global coverage across many classes of assets including stocks, bonds, forex, funds, and derivatives.
Pricing: eSignal has three different subscription plans to choose from: Classic, Signature, and Elite. The Classic plan costs $54 per month while the Signature tier goes for $176 per month. Elite is the last plan and traders have to pay $359 a month to use.
However, eSignal offers a 10% discount for all tiers if you prepay for an annual membership.
- High-quality data
- Advanced charting capabilities
- Endlessly customizable
- Excellent drawing tools and indicators
- Great trade management interface with fundamental figures and news coverage
- Many addons are quite expensive, and each one has an individual price
TC2000 is a powerful trading platform that was created by Worden Brothers. It focuses on charting and offers various proprietary analysis tools, screeners, and even trading through their own brokerage company.
Pricing: Traders can choose from a few different packages when deciding to purchase TC2000 software. The first package is called Silver and costs $9.99 per month. The Gold package is the next step up from Silver and goes for $29.99 a month. The Platinum package is their most expensive with a $89.98 monthly price tag.
- Robust charting and scanning tools with rich graphics
- Simulator where inexperienced traders can practice trading their strategies with virtual money
- An easy to use interface
- Traders need to use the filter system to avoid having to deal with too much data
Another popular stock trading software offering research capabilities, TD Ameritrade’s Thinkorswim packs essential features including customizable technical charts, live trading, and demo accounts. Thinkorswim is good for both beginners and professional traders.
Pricing: There are no account minimums, trading requirements, or required fees to use Thinkorswim.
- Robust charting tools and customization features
- Allows users to practice with virtual money
- Plenty of technology to keep users up to speed with the financial world
- Live webcasts to help users learn the software
- Many options and customizations that can make the amount of information on the screen a bit overwhelming
Another popular technical analysis software applications, MetaStock helps traders make more informed trading decisions using its advanced charting abilities and powerful tools for trading in stocks, futures, options, indices, forex, fixed income products, and commodities.
Pricing: MetaStock is available as a single purchase or as a monthly or annual subscription. You can also try it for 30 days for free. The first plan is MetaStock Real Time and this costs anywhere from $99-$300 per month depending on the add-ons and options you want.
Then there is the MetaStock Daily Charts subscription that will cost you either $24.94 per month or a one-time payment of $449. This plan is especially designed for end of day traders.
- Powerful scanning and analyzing tools
- Ability to code your own indicators and trading systems
- Tons of customization features
- Rich graphics that are easy to look at
- Easy-to-use interface
- Excellent and friendly customer service
- Prices may turn off new traders
Despite being fairly new in the world of technical analysis, TrendSpider uses complex algorithms and has a wide variety of securities amongst several asset classes, which makes it one of the best charting platforms in the fintech industry.
This automated trading software allows traders to implement their strategies with technical analysis and receive notifications at certain, pre-set trigger points.
Pricing: TrendSpider’s PRO Trader plan will run you $32.50 per month (25% discount for yearly subscription). The ELITE Trader plan costs $48.92 per month (25% discount for yearly subscription).
- Top quality automated charting software
- Useful alert system tied to most technical indicators
- Wide range of data sets available across most widely traded assets
- Very reasonable prices and a free trial period
- Good customer support for the technical aspects of the software
- Only ideal for traders who want to automate some or all of their chart analysis.
- No social community
Technical analysis is essential in day trading as it helps traders make more financially sound trading decisions. By evaluating the history of stock prices, traders get a future reading of what a particular stock would be priced at.
With the help of technical analysis software, you are able to analyze stock charts, identify instability in the stock prices in the past and present, support and resistance levels, spot trends, and time entry and exit points.