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Financial Literacy

What to Look for in Pattern Trading Software

For day traders, a brokerage account isn’t enough to trade effectively. In-depth technical analysis demands specific pattern trading software. While many brokerages offer tools to make pattern charting and technical analysis simple and convenient, most traders will find themselves gravitating to other tools. The question is this: What kinds of tools?

There’s a world of software, resources and technical tools out there. If you’re looking to delve deeper into the world of technical analysis and pattern trading, it’s recommended you explore them for yourself. Specifically, here’s what to look for. 

This pattern trading software provides graphical data

Consider Analytical Intent of Pattern Trading Software

Technical analysis and pattern trading are largely the product of reviewing chart data. And while some simple patterns, like triangles and channels, are easy to spot on a candlestick chart, traders need tools to dive deeper into patterns as they see them. With that in mind, it’s vital to make sure your pattern trading software offers the capabilities to achieve a certain level of analysis. In general, you need to quickly and easily identify, qualify and quantify the following:

  • Stock value compared with market metrics
  • Historical instability or trends in price
  • Recently established support and resistance levels
  • Trends and patterns that manifest
  • History of trades and volume.

These are surface-level data points that inform basic entries and exits for positions. They can add some context to securities but benefit further from tools that contextualize this data. 

Access Tools of the Trade

The most important feature offered by pattern trading software is the ability to manipulate stock charts. Mark them up. Draw lines. Add filters. This is all important in qualifying patterns and trends. Beyond this, chart software also needs to offer the following features for pattern context:

  • Advanced charting capabilities
  • Analytical breakdown tools
  • Auto-recognition tools for patterns
  • Built-in ratios and threshold tools
  • Chart customizations
  • Chart scanning tools
  • Drawing tools and indicators
  • Historical and real-time data.

These types of tools serve several important purposes beyond textualization. First, they give traders agility. Plugging real-time data into charting software to mark up and calculate means rapid pattern qualification. Second, built-in calculations and automations prevent user error, which could be costly in the context of a bad stop loss or miscalculated target. Finally, they present an opportunity for traders to get better. Constant access to technical tools results in more comfort with technical evaluation. 

Where to Find Technical Tools and Pattern Trading Software

There’s no shortage of pattern trading software out there. As mentioned, most brokers have technical analysis tools available – especially for Level 2 accounts. Some standout brokers include…

  • TD Ameritrade, which offers its reputed Thinkorswim platform
  • Fidelity, which has a popular application called Active Trader Pro that is rife with features.

Outside of brokerages, several third-party websites and applications offer features specific to options traders and technical investors. For example, some of the most popular technical analysis sites include…

  • eSignal, a steadfast market leader in technical analysis software
  • MetaStock, which offers a suite of apps and features that can connect directly with brokerages
  • StockCharts, which gives you access to hundreds of technical indicators and tools
  • TC2000, another longtime stalwart in technical analysis, reputed for its tools.

There are dozens of other tools, each with different presentations, features, interfaces and more to make them unique. For many day traders, the success of their technical analysis and pattern trading comes from the familiarity they develop with a certain tool or software. It’s best to explore a couple of options to see what feels right. 

Should You Pay for Pattern Trading Software?

Discovering trading patterns is the most prominent indicator for some investors. In fact, these patterns help experts decide when to buy, sell or hold a stock. If you are looking for the latest stock trends, sign up for the Profit Trends e-letter below. The experts at Profit Trends may help you find the next market mover to enhance your investment portfolio.

If you’re just starting out or trading as a hobby, you can likely get by with the free tools your broker offers. If you’re trading thousands a day in options or deep in technical analysis, pattern trading software can often pay for itself in the insights it offers. It’s up to you and your level of need. More experience generally facilitates the need for better tools.


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