Share trading has for many centuries been a lucrative and exciting opportunity for investors seeking to earn a portion of the profits generated by successful companies in various sectors, industries or even countries. Shares are typically issued by companies to fund growth or expansion plans. By buying shares in a company, you become a legal part-owner of the business, which may give you voting rights as well as an entitlement to a share of the profits in the form of dividends. Previously, share trading required massive amounts of capital and was limited within certain jurisdictions. But the rise of technology has opened share trading to all types of retail investors, with no capital or territorial restrictions.
Investors can now trade their favorite companies from all around the world and earn profits as their underlying share prices fluctuate. But while accessibility is no longer an issue, investors still require proper knowledge and technique so as to consistently make money when trading shares.
Share Trading Software
Share trading software is a programmed computer tool that helps investors pick out the best stocks that will deliver returns both in the short and long term. They provide comprehensive analyses on numerous stocks and investors can also customize them to create their own personalized trading strategies.
A typical share trading software will pick out the best shares to trade by factoring in both technical and fundamental qualities of the underlying company. Fundamental factors include earnings reports and financial ratios such as ROE (return on equity); while technical factors include historical price charts and psychological price points. Beyond analysis, share trading software also ensures that you are able to implement an effective risk management strategy when trading your favorite shares in the market. Share trading software is particularly even more efficient when trading share CFDs (contracts for differences), where investors do not own the underlying stock but seek to profit from its price changes. This means that profits can be made whether share prices are rising or falling.
The Pros of Using Share Trading Software
There are many benefits of having a computer to research the markets for you, as opposed to doing it manually. Here are some of them:
- Speed and Accuracy:
Share trading software tracks and picks out the best shares to trade faster and more accurately than any human mind. Furthermore, trade entries and exits are executed at the most optimal price points, without any delay.
Share trading allows for free backtesting of any strategy against historical price movements of underlying stocks you wish to trade. This allows for quick verification of the effectiveness of a strategy you wish to apply in the markets.
Because they allow for quick testing, optimization and verification of strategies, share trading software give investors the opportunity to implement multiple, sophisticated strategies to pick out the best stocks to trade in both the short and long term. This means investors are exposed to more profit opportunities in the shares market.
- Objective Trading:
Share trading software guarantees pure objectivity when picking out the best shares to trade in the markets at any given time. There is no danger of subjective human emotions such as fear, greed or bias interfering with objective stock picking trading activity. The software practically ensures maximum discipline when trading your favorite stocks.
The Cons of using Share Trading Software
Despite the clear benefits, trading shares using software is not without its limitations. Here are some of the disadvantages:
- Technology Failures:
Like every other computer program, share trading software is susceptible to technological failures. This can be in the form of bugs, crashes or even downtimes that limit efficient communication with broker servers. This can result in the inefficient implementation of an investor’s trading strategy. Some share trading software bypass this limitation by integrating VPS (virtual private server) functionality to guarantee the best execution regardless of technology mishaps.
- Over Optimization:
The ease of doing backtesting and optimization also comes with its own risks. The constant tweaking of strategies to achieve the best possible results may lead to developing a complex strategy that will not be practical in trading shares in the real market. While it is important to try to improve trading strategies, it is also wise to avoid the temptation to chase perfection.
- Difficult to Code some Types of Strategies:
Share trading software is best utilized when trading logical strategies in the market. They will make the best decisions quickly and accurately at all times when picking stocks based on set parameters. This means that investors who pick stocks based on intuition or another form of intelligence that cannot be replicated artificially will not be able to effectively use share trading software.
Recommended Share Trading Software
The Stock Master
Developed by legendary investor, David Campbell, Stock Master is undoubtedly one of the best stock trading software available. The software is not only designed to pick stocks based on underlying technical and fundamental qualities of companies; it also has artificial intelligence integrated which ensures that it is able to identify and learn price patterns, make sense of underlying company fundamental data, and also adjust risk management parameters in different market conditions so as to enhance profitability and limit risk exposure.
There are thousands of stocks around the world available for trading every single day. Stock Master scans for both short- and long-term trading opportunities in the best stocks throughout the day. The software is fully automated, but it allows investors to set their custom stock trading parameters, such as trading style, preferred stock exchanges, high or low cap stocks, stake amounts, as well as risk management order. The software also supports VPS functionality and its servers are integrated with their recommended top brokerage firms to guarantee the best execution of all types of orders at all times. Despite all this, it is currently, amazingly, available for free for a limited time to select beta users.
MT4 Trading Software
MetaTrader 4 has over the years grown to be the most popular CFD trading platform among retail investors. Its success is largely because of a simple and user-friendly interface, and also its comprehensive professional-grade trading tools and resources. One of its important features is that is also supports automated trading.
On its MQL4 IDE (Integrated Development Environment), investors can develop personalized Expert Advisors (EAs) or even custom indicators of any level of sophistication. MQL4, the native programming language on the MT4 platform is easy to use and understand but non-programmers can utilize the template based MetaEditor that allows quick and easy debugging and compilation of strategies. Developed strategies can then be tested and tweaked on Strategy Tester, where an in-built Optimization tool will also help investors to choose the most optimal parameters for efficient application of the underlying trading strategy. MT4 platforms allow traders to speculate on the share CFDs of major companies from top global exchanges.
LEARN MORE ABOUT MT4 BROKERS HERE
MT5 Trading Software
MT5 was launched as the latest iteration of the MetaTrader platform. It was specifically designed to support the trading of other financial asset classes. For stocks, investors can not only trade underlying CFDs but can also buy actual shares and stand to earn dividends on them. Like MT4, MT5 also supports the entire software development process on its MQL5 IDE – from creation, debugging and testing to optimization and execution on its platform. The MQL5 IDE has been improved to enhance automated trading. For instance, the Strategy Tester features a wide network of independent testers while the MQL5 community features a wide market where investors can sell their EAs to other members or even contract developers for custom made software.
MT5 also runs its own proprietary VPS services that guarantee the best execution on all investor stock trading orders placed on the MetaTrader 5 platform.
LEARN MORE ABOUT MT5 BROKERS HERE
Swing Trade Bot
The Swing Trade bot is also a popular stock trading software intended to help investors filter out the best stocks to trade in the world’s biggest stock exchanges. The software operates largely as a stock screener, and it features an impressive Watch List and Portfolio section that helps traders have a quick glance on the best stocks to trade in any session, as well as an alert system that notifies investors when the best trading opportunities manifest on their favorite stocks.
Swing Trade Bot is linked with many global stock exchanges and investors have the option to try a basic version for free. There is however a paid version that features more premium functionalities. While a solid software, Swing Trade Bot is ideal for the more experienced investors who are able to navigate its relatively complex interface as well as utilize its advanced configuration procedures.
READ FULL SWING TRADE BOT REVIEW HERE
Types of Share Trading
Shares represent units of ownership in a company. Different companies will inherently be different in business models, profitability, mode of operations or even valuation metrics. This difference is usually reflected in their share prices as well. This means that investors tend to trade different shares with different styles so as to maximize profit opportunity and minimize risk exposure. Savvy investors understand that no two stocks should be traded in the same manner because of the different characteristics they portray.
Here the different types of share trading:
Short Term Trading
This is a type of trading utilized by investors who wish to book a predetermined profit return within a short duration of time, usually within a day or a few days. Investors utilize this strategy when they expect the underlying share price to make a quick positional move within a short period of time. An example would be buying a stock that is lagging its industry peers but is expected to catch up. Short term trading requires great skill and is usually implemented by experienced investors. New investors may find it difficult to apply this type of share trading.
This is a fairly straightforward type of trading. It involves placing an order to buy a stock at the current prevailing market prices. An investor can implement this by calling his broker or utilizing the broker’s platform to execute the order at the current rate. For investors, market orders are ideal because they are buying a stock at its true pricing level and usually with much cheaper costs. The objective is to sell at a later date for a profit. There is usually no time limit for such a position, with only the profit objective being the only motivation.
As per the name, intraday trading involves buying and selling shares within the same trading day or session. No trade positions are held overnight. This is an aggressive type of stock trading that requires a great deal of focus and advanced investing skills. Investors who apply this type of trading are usually focused on technical price analysis. Fundamentals rightly take a back seat because they may take a lot of time to be accurately reflected on an underlying share price. Such investors also prefer the tick chart because every price change is a profit opportunity for them.
Also referred to as Speed Trading, High-Frequency Trading (HFT) involves placing multiple trades throughout the day that sometimes can be closed within a few minutes or even seconds. The idea behind HFT is to book profits on minor price changes multiple times throughout the day. Speed and execution are the differential factors when implementing HFT in share trading. For that reason, many HFT strategies are almost entirely automated so as to efficiently take advantage of marginal price changes in different shares throughout the day.
Swing Trading is a type of trading that investors apply when they anticipate an asset’s price to make a ‘swing’ or a directional move within a few days or weeks. The goal is to capture a good chunk of profit during this anticipated move. In this type of trading, an investor attempts to predict the extent to which the asset price may move. Swing traders mostly utilize technical analysis, but they also consider underlying fundamental factors. For this type of trading, investors must also take into account how rollover fees may impact their overall profits for positions held overnight.
Positional Trading is a little similar to Swing Trading, but for a slightly longer duration. In this type of trading, investors literally take an informed ‘position’ on where they expect the price of a share to go. The position must take into account both fundamental and technical qualities of a share. Positional traders are not bothered by short term price changes and may hold their trades for as long as their initial research holds with the aim of booking even larger profits.
Long Term Trading
Long term trading can also be referred to as value investing. In this type of trading, investor stock positions are purely informed by long term fundamentals of underlying companies. Trade positions can be held for several months or years. Short term price dynamics do not in any way influence their overall bias on a stock. The goal of long-term trading is to achieve sustainable profits in the market. Typically, long term investors will earn profits out of share price gains as well as company dividends and less tax obligation.
Not to be confused with automated or algorithmic trading, Quantitative Trading involves the use of statistical and mathematical methods to determine the best opportunities in the shares market. This type of trading is data-based and designed to offer investors high probability statistical models that will help filter out the best stocks to trade at any given time. This is a type of trading that requires massive computational power to accurately analyze all data sets of underlying shares to be traded. In most cases, only the big banks and hedge funds can manage to implement this type of trading in the markets.
Arbitrage Trading is a type of trading that seeks to take advantage of inherent inefficiencies in the financial markets. It is usually considered a low-risk type of trading that takes advantage of the integration of financial systems. A typical Arbitrage trade will seek to take advantage of a pricing inconsistency between two platforms. This means that an investor can buy a share from company A and sell, almost immediately, to company B that priced the value of the share differently. Arbitrage opportunities cannot be exploited by the naked eye and also, they require massive computational power to be spotted and taken advantage of efficiently.