One way of making light work of the functions involved with technical analysis is by using a technical analysis software package. Most of these packages to some extent share the following features: back testing, charting, market scanning, optimisation, customer indicators, alerts, live data feeds and the ability to connect directly to a broker platform.
Any good software package will have the ability to create charts. A chart is basically just a way to present movements in the price or trading volumes of a stock/currency/commodity in a graphical manner. There are various different types of charts. The simplest one is the line chart. Another very poplar type is the candlestick chart and many traders still have a preference for the bar chart.
The main advantage of using charting software is that it makes it very easy to see when a specific technical indicator generates a trade signal. A basic example is when the price of a commodity rises above the three week moving average. If you are connected to live price feeds these charts can be generated automatically by the software ' setting you free to simply react to certain trading signals.
Another very useful feature of every good technical analysis software package is the ability to use back testing. This simply means using historical data to test how your trading strategies would have done under real life circumstances.
If you find a system that works well on back testing, you can use optimisation to fine tune it further to get the best possible results. There is a danger involved here: the past very seldom repeats itself in exactly the same way, so your system might work 100% on historical data, but somehow never make money for you. That is called over-optimisation.
You should also make sure your technical analysis software has the ability to connect to a real-time data feed. You will therefore also need a provider of real-time data. Mostly they will give you more than just live prices. Often you will get valuable market information, SENS notices and trading tips as well.
Any good software package will have the ability to create charts. A chart is basically just a way to present movements in the price or trading volumes of a stock/currency/commodity in a graphical manner. There are various different types of charts. The simplest one is the line chart. Another very poplar type is the candlestick chart and many traders still have a preference for the bar chart.
The main advantage of using charting software is that it makes it very easy to see when a specific technical indicator generates a trade signal. A basic example is when the price of a commodity rises above the three week moving average. If you are connected to live price feeds these charts can be generated automatically by the software ' setting you free to simply react to certain trading signals.
Another very useful feature of every good technical analysis software package is the ability to use back testing. This simply means using historical data to test how your trading strategies would have done under real life circumstances.
If you find a system that works well on back testing, you can use optimisation to fine tune it further to get the best possible results. There is a danger involved here: the past very seldom repeats itself in exactly the same way, so your system might work 100% on historical data, but somehow never make money for you. That is called over-optimisation.
You should also make sure your technical analysis software has the ability to connect to a real-time data feed. You will therefore also need a provider of real-time data. Mostly they will give you more than just live prices. Often you will get valuable market information, SENS notices and trading tips as well.
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