Technical analysis software
Encyclopedia
Technical analysis software automates the charting, analysis and reporting functions that support technical analysts
in their review and prediction of financial market
s (eg. the stock market
).
and open-high-low-close
(OHLC) 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 and resistance trend line or for example Fibonacci retracement
s to help establish trending patterns.
. 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 trading strategy based on technical analysis indicator criteria, which will generate a positive return. This concept was computerized and introduced to traders by Louis B. Mendelsohn
in 1983 with his ProfitTaker Futures Trading Software (see August 2010 issue of Stocks, Futures & Options Magazine).
has four parameters that effect its results: %k, %d, slowing period, interval period. Optimization must be performed carefully to avoid curve fitting
. Back testing of an over-optimized 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-optimization is by carrying out optimization on historical data and then performing future testing (sometimes referred to as 'out of sample') before making a final evaluation of a trading strategy.
). Some software will also provide a mean to customize, combine or create new indicators. This is typically achieved with a proprietary scripting or graphical language
.
. 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.
or open source
software. Such software may be available on a computer, or on a mobile phone
or personal digital assistant
(PDA). Mobile phones and PDAs allow a user to access online technical analysis packages when away from their computer. However, packages that require the use of Java applet
s may not work on older model mobile phones or PDAs. Online technical analysis software packages provide access from any Internet-connected computer (including a suitably equipped mobile or PDA), but may require the user to store their information with the provider. Installed, downloaded software will only be available on the computers that the user has downloaded and installed it on.
Technical analysis
In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
in their review and prediction of financial market
Financial market
In economics, a financial market is a mechanism that allows people and entities to buy and sell financial securities , commodities , and other fungible items of value at low transaction costs and at prices that reflect supply and demand.Both general markets and...
s (eg. the stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
).
Features
The following are the most common features of technical analysis applications. Some software may focus on only one aspect (say back testing) and the combination of more than one software package is often required to build a fully automated trading system.Charting
A graphical interface that presents price, volume and technical analysis indicators through a variety of visual interfaces such as line, bar, candlestickCandlestick chart
A candlestick chart is a style of bar-chart used primarily to describe price movements of a security, derivative, or currency over time.It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in...
and open-high-low-close
Open-high-low-close chart
An open-high-low-close chart is a type of chart typically used to illustrate movements in the price of a financial instrument over time. Each vertical line on the chart shows the price range over one unit of time, e.g. one day or one hour...
(OHLC) 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
Day trader
A day trader is a trader who buys and sells financial instruments within the same trading day such that all positions will usually be closed before the market close of the trading day. This trading style is called day trading...
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 and resistance trend line or for example Fibonacci retracement
Fibonacci retracement
In finance, Fibonacci retracements is a method of technical analysis for determining support and resistance levels. They are named after their use of the Fibonacci sequence...
s to help establish trending patterns.
Back testing
Enables traders to test technical analysis investment timing strategies against historical price movement for one or more specific securitiesSecurity (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
. Strategies are compared to each other using diverse performance measurements such as maximum drawdown, annual profit and Sharpe ratio
Sharpe ratio
The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-variability ratio is a measure of the excess return per unit of deviation in an investment asset or a trading strategy, typically referred to as risk , named after William Forsyth Sharpe...
. The objective is to try and develop a trading strategy based on technical analysis indicator criteria, which will generate a positive return. This concept was computerized and introduced to traders by Louis B. Mendelsohn
Louis B. Mendelsohn
Louis B. Mendelsohn, a pioneer in the application of personal computers to the financial markets, is President and Chief Executive Officer of Market Technologies, LLC, which he founded in 1979 to develop technical analysis trading software for use by commodity futures traders.- Biography...
in 1983 with his ProfitTaker Futures Trading Software (see August 2010 issue of Stocks, Futures & Options Magazine).
Optimization
A process of testing technical analysis indicator parameters, with the view to developing an investment strategy that generates the maximum return based on historical price movement. The optimization 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 indicatorStochastic oscillator
In technical analysis of securities trading, the stochastic oscillator is a momentum indicator that uses support and resistance levels. Dr. George Lane promoted this indicator in the 1950s. The term stochastic refers to the location of a current price in relation to its price range over a period...
has four parameters that effect its results: %k, %d, slowing period, interval period. Optimization must be performed carefully to avoid curve fitting
Curve fitting
Curve fitting is the process of constructing a curve, or mathematical function, that has the best fit to a series of data points, possibly subject to constraints. Curve fitting can involve either interpolation, where an exact fit to the data is required, or smoothing, in which a "smooth" function...
. Back testing of an over-optimized 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-optimization is by carrying out optimization on historical data and then performing future testing (sometimes referred to as 'out of sample') before making a final evaluation of a trading strategy.
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, a user could, for example, scan the market to identify oversold stocks that have stochastic and RSI value of less than 20% and 30 respectively.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).Custom indicators
Most technical analysis software includes a library of de-facto standard indicators (e.g. moving averages and MACDMACD
MACD is a technical analysis indicator created by Gerald Appel in the late 1970s. It is used to spot changes in the strength, direction, momentum, and duration of a trend in a stock's price....
). Some software will also provide a mean to customize, combine or create new indicators. This is typically achieved with a proprietary scripting or graphical language
Graphical language
Graphical language may refer to:* Visual language, a system of communication using visual elements.* Visual programming language, a computer programming language that lets create programs by manipulating program elements graphically....
.
Data feed
Technical analysis software is typically used with end of day (EOD), delayed or real time data feedsMarket data
In finance, market data is quote and trade-related data associated with equity, fixed-income, financial derivatives, currency, and other investment instruments. Market data is numerical price data, reported from trading venues, such as stock exchanges...
. 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
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
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.
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.Platforms
Technical analysis software is available in the form of commercialProprietary software
Proprietary software is computer software licensed under exclusive legal right of the copyright holder. The licensee is given the right to use the software under certain conditions, while restricted from other uses, such as modification, further distribution, or reverse engineering.Complementary...
or open source
Open source
The term open source describes practices in production and development that promote access to the end product's source materials. Some consider open source a philosophy, others consider it a pragmatic methodology...
software. Such software may be available on a computer, or on a mobile phone
Mobile phone
A mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...
or personal digital assistant
Personal digital assistant
A personal digital assistant , also known as a palmtop computer, or personal data assistant, is a mobile device that functions as a personal information manager. Current PDAs often have the ability to connect to the Internet...
(PDA). Mobile phones and PDAs allow a user to access online technical analysis packages when away from their computer. However, packages that require the use of Java applet
Java applet
A Java applet is an applet delivered to users in the form of Java bytecode. Java applets can run in a Web browser using a Java Virtual Machine , or in Sun's AppletViewer, a stand-alone tool for testing applets...
s may not work on older model mobile phones or PDAs. Online technical analysis software packages provide access from any Internet-connected computer (including a suitably equipped mobile or PDA), but may require the user to store their information with the provider. Installed, downloaded software will only be available on the computers that the user has downloaded and installed it on.
Feature comparison of products
| Back testing | Optimisation | Scanner | Alerts | Built-in indicators | Custom indicators | Data feed | Broker interface | Online | Mobile phone / PDA access | Open source | Windows | Mac OS | Linux | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tradermade International Ltd | ~50 | Real Time, EOD, Delayed | ||||||||||||
| Statmetrics Statmetrics Statmetrics is a free cross-platform software application providing an interactive environment for computational finance. Statmetrics is an analytical tool which offers several modeling techniques to analyze selected markets und integrates widely implemented quantitative finance technologies in... |
~30 | EOD, Real-time | ||||||||||||
| TraderStar | 40+ (Java Scripts) | EOD, Real-time | ||||||||||||
| Reliable Software's Falcon7 | 300+ | EOD, Real-time | ? | ? | ||||||||||
| CarryQuote CarryQuote CarryQuote is a privately-held company that provides integrated mobile and web access to every major exchange in real-time via smartphone, pad, or computer... |
Real Time, Delayed | ? | ? | |||||||||||
| Adaptive Modeler Adaptive Modeler Altreva Adaptive Modeler is a software application for creating agent-based financial market simulation models for the purpose of forecasting prices of real world market traded stocks or other securities... |
Genetic Programming | Flexible CSV file reader | ||||||||||||
| AmiBroker | ~100 | Real Time, Delayed | ? | ? | ||||||||||
| Aspen Graphics WebChart | 94 | Real Time, Delayed | ||||||||||||
| Aspen Graphics Workstation | SMS/Email | 40 | Real Time, Delayed | ? | ? | |||||||||
| ATRADER | ~50 | Real Time, Delayed | ? | ? | ||||||||||
| Axial Finance | 80 | EOD, Real Time | ||||||||||||
| Bloomberg L.P. Bloomberg L.P. Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P... |
100+ | Real Time, Delayed | ? | ? | ||||||||||
| Channalyze | ~50 | EOD | ? | ? | ||||||||||
| ChartAlert | ~100 | EOD | ? | ? | ||||||||||
| CQG CQG CQG is a privately held company creating financial software solutions for market technical analysis, charting, and electronic trading. CQG specializes mostly in the futures market but provides both real-time and historical data from more than 100 exchanges from North and South America, Europe, Asia... |
~220 | EOD, Real Time, Delayed | ||||||||||||
| DashBo↗vDashBov | ~2 | EOD | ||||||||||||
| EdgeRater | ~100 | EOD | ? | ? | ||||||||||
| Esignal 11 | ~200 | EOD, Real Time | ||||||||||||
| FinanceIQ | ~80 | EOD | ? | ? | ||||||||||
| FXGraph Premium | ~8 | EOD,Delayed | ? | ? | ||||||||||
| iGuideStocks | ~25 | Real Time | ? | ? | ||||||||||
| Market Analyst Software | ~160 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| Merchant of Venice | 7 | EOD | ? | ? | ||||||||||
| MetaStock MetaStock MetaStock is a proprietary computer program created by Equis International used for charting and technical analysis of stock prices. It has both real-time and end-of-day versions.- External links :*... |
~200 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| MetaTrader 4 MetaTrader 4 MetaTrader 4, better known as MT4, is an electronic trading platform widely used by online retail foreign exchange speculative traders. It was developed by MetaQuotes Software and released in 2005. The software is licensed to foreign exchange brokers who provide the software to their clients. ... |
Real Time | |||||||||||||
| MultiCharts | ~250 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| NexTick | SMS/Email | ~7 | Real time (OpenTick), EOD(Yahoo) | ? | ? | |||||||||
| NinjaTrader | ~100 | EOD, Delayed, Real Time | ||||||||||||
| Optimal Trader | 15 | EOD, Delayed | ? | ? | ||||||||||
| Piggy Market Squeak | EOD | ? | ? | |||||||||||
| PhoenixAI | ~115 | Real Time, Delayed | ? | ? | ||||||||||
| ProRealTime | ~70 | Real Time, EOD | ||||||||||||
| Protrader Protrader Protrader 2 - is a multi-asset trading platform developed by PFSoft LLC, representing complete solution for brokerage. Platform supports connections to biggest data and liquidity providers, has smart routing functionality, combines straight-through processing and market making capabilities... |
~60 | Real Time, EOD, Delayed | ||||||||||||
| Qtstalker Qtstalker Qtstalker is a free technical analysis program for POSIX systems. It is similar to commercial software such as Metastock, Supercharts and TradeStation, and keeps to a lean, simple design for speed, portability and low resource usage. Qtstalker can be extended because it uses a plugin model... |
~130 | EOD, Delayed | ? | ? | ||||||||||
| Recognia Technical Insight | ~50 | EOD | ? | ? | ||||||||||
| Sierra Chart Sierra Chart Sierra Chart is a proprietary computer program used for charting and technical analysis.- Advanced Custom Study Interface and Language :Sierra Chart has an advanced and easy to use custom study interface and language , which allows you to create your own custom studies and trading systems, as well... |
~240 Built-in/ ∞ Programmable | EOD, Delayed, Real Time, CVS | ||||||||||||
| sgcTrader | ~100 | Real Time, Delayed | ? | ? | ||||||||||
| Spider Software | infinite | EOD,Real Time | ? | ? | ||||||||||
| Stocker | 13 | Delayed | ? | ? | ||||||||||
| StockWrap | 130 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| StrataSearch | ~100 | EOD | ? | ? | ||||||||||
| TA-Lib TA-Lib TA-Lib is an open-source software library of technical analysis indicators. The library provides about 125 functions like ADX, RSI, MACD, Stochastics, Bollinger Bands, candlestick pattern recognition. TA-Lib can be reused by trading software developers working with Excel, .NET, Java, Perl, Python,... |
125 | ? | ? | |||||||||||
| Tashash.com | ~20 | EOD | ? | ? | ||||||||||
| Technical Analyst Trader | ~100 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| Telechart | EOD, Delayed, Real Time | ? | ? | |||||||||||
| Tradesignal standard edition | ~170 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| TeleTrader Professional Workstation | 200 | EOD, Delayed, Real Time | ? | ? | ||||||||||
| Timetotrade | 9 | EOD, Delayed | ? | ? | ||||||||||
| TradeStation TradeStation TradeStation is a Windows-based application, designed, sold and distributed by TradeStation Securities, Inc. It is technical analysis software that is used for analyzing and trading the financial markets. It uses a built-in proprietary programming language named EasyLanguage.TradeStation is a... |
~100 | Real Time | ||||||||||||
| Wave59 | 35+CustomLibrary | Supports EOD, Delayed, Real Time | ? | ? | ||||||||||
| WinChart WinChart WinChart is a technical analysis program in Malaysia created by Straits Index Sdn Bhd, founded in 1998. WinChart is the first in Malaysia that comes in three languages, English, Chinese, and Malay, providing charting tool to study technical analysis trends and chart pattern of stocks... |
~20+Metastock | Delayed,EOD | ||||||||||||
| XTick | ~100 | Real Time | ? | ? | ||||||||||