The Power of the PC
Thanks to the geniuses in Silicon Valley and other spots around the globe, the power of the personal computer has grown exponentially over the past 20 years. Despite this, very few day-traders and active investors actually use the full power of their personal computer systems.
Most day-traders run a single piece of software on a mid-level computing machine which, at this point, means a computer more than 2 years old. This software is usually a brokerage-provided trading application that combines a brokerage service (i.e. a way to actually execute trades) with tools for news, charting, and analysis.
Usually, these applications are fairly comprehensive and are a great starting point for any trader. Besides using a single piece of software, most stock market traders get all of their information and analysis from the internet. However, the internet is not always the best method for gathering data.
The Internet Is Best For Some Things, But Not For Everything
The web is a wonderful resource, but anyone who has worked with computers for long knows that working in the internet world is not as fast, efficient, or stable as running something on the computer desktop. Desktop applications are meant to do one thing very well and they can be made to run lightning-fast in their native environment, whereas the internet experience, even at its best, is often marred by painful wait times as pages are loaded into the browser (or whatever is going on while that little wheel spins).
In the modern world of web 2.0, this is an even bigger impediment as the user is hit with videos, moving ads, and dynamic data streams. On top of that, you’re lucky if the page that you were waiting to load was the actual website and not just a full-page advertisement that pops up before your page actually loads.
Some web sites are faster and more stable than others, but with millions of links to click on, it’s not long before your information-gathering experience can hit a snag and bog down (or even lock up, requiring a restart of the browser). This varying performance aspect, along with the inconsistent look-and-feel of different web sites, can be a frustrating problem when you’re trying to do market research and analysis. I don't want to downplay the internet, which is obviously an amazing and tremendous resource, but it does have a few drawbacks and isn't always the best for everything.
The Advanced Market Trader
Not all traders stick to the basics. Some tech-savvy individuals go the extra mile and run 3rd-party software applications that provide further powerful features and offer deeper levels of analysis. These systems usually provide additional screening and charting capabilities, and they often employ more advanced mathematical techniques for determining patterns, strength and weaknesses (e.g. greek calculators and momentum trends). These tools range from very fancy and showy to very plain and academic. Personally, I prefer a plain, technical look-and-feel to my applications. I don’t want to pay for fluff, and I don’t want software development teams to be spending any time on that either. Regardless of the look, in the right hands, these software tools can provide a tremendous trading advantage.
Many advanced home-based traders employ leading-edge computer hardware like Intel Corei7 CPU’s, triple-channel RAM memory, and Solid State Disks (SSD's) to insure that their software runs as fast as possible (including the internet/browser experience). In addition, many advanced traders deploy multiple-monitor setups so they can access all of their tools at once. Instead of screens popping up and down on a single monitor, they have dedicated screens for quotes, charts, news, trade execution, and internet browsing. The relevant screens are always visible, enabling the user to act on information in real-time. Again, in the right hands, this can be a tremendous day-to-day advantage.
Example Of An Advanced Trading System
One example of a core trading application that provides excellent out-of-the-box functionality is Power E-Trade Pro. The software handles basic trades for stocks, options, bonds, and ETF's, as well as complex options trades and conditional orders (e.g. stops, trailing stops, sell X shares if Y happens). The program provides a massive amount of information and includes several powerful tools for doing real-time market analysis. It has a very technical and highly-configurable interface, and by default displays green, red, and white text on a black background so you don’t have to stare at a super-bright screen all day long.
Besides Power E-Trade Pro, there are many other examples of quality stock market trading applications including Interactive Brokers, Tradestation, and Think or Swim (which is offered by TD Ameritrade). Each offers it's own suite of quality tools and services covering quotes, charting, news, and analysis. They are also supported by well-established brokers, which is a very important consideration when selecting the core for your trading system.
To supplement the main software functionality, raw stock market data can be downloaded using a number of software programs (including some of the core packages mentioned above). There are also several sources online which offer raw market data, including some free ones (this is usually End-of-Day (EOD) market quote data). The raw data can be analyzed using Microsoft Excel or any number of more advanced data-mining applications to spot micro trends (for individual symbols) as well as macro (economic and sector) trends. The data can be sliced up and viewed in a nearly infinite number of ways using custom formulas, SQL queries, and data visualization methods. This ability to do custom analysis is what really makes a trading system "advanced". It's what provides that extra bit of knowledge that can really give someone an edge when deciding which side to take on any given trade.
On the hardware side, it really is best to use newer-generation components in order to minimize any computational or network-related delays. This provides a more enjoyable work environment as well as powering the tools needed to get a serious trading edge. Multiple monitors are a must-have if you really want to employ an advanced trading system and stay on top of the latest information.
Who Has The Real Advantage When Trading In The Stock Market?
Every single trade that is made, whether in stocks, options, or futures, is a 1-on-1 exchange between you and another trader. It doesn't matter if it's a guy sitting at home in his pajamas or the manager of the most massive and aggressive hedge fund in the world. On every single trade there is a buyer and a seller. Raw instinct is perhaps the most important skill for an active trader, but whoever has the most accurate and timely information has given themselves a distinct advantage. Consider how much computing firepower you are up against on each trade and you will realize that every trader should re-evaluate their computer arsenal so they can at least give themselves a fighting chance.