Stock Trading Systems
 By following a
stock trading system,
market condition will at times be favourable to buy and at other times
be favourable to sell. Clearly defined conditions give signals that
the educated investor can read and act on. Signals are not as crucial
for the long term investor. For these people, market conditions and the
value of particular companies can be watched on a daily basis. For
day-traders, however, signals are crucial for acting quickly on stock
market movements.
Investors who treat trading as a full-time job have the time to watch
the market movements for signals. Oftentimes, however, signals can be
automated and integrated into trading software. The investor can choose
which signals to be alerted about and they will automatically appear on
screen. Software signals are usually only available by subscription and
some services charge hundreds of dollars a year for a complete package.
This includes trading software and access to up-to-the-minute charts for
the latest information about the stock market.
Investors who don't have the time to watch the market closely can
subscribe to services which publish signals on a daily or hourly basis.
These stock trading systems may employ
market analysts who may follow several indicators to arrive at a
particular signal. More commonly, however, their systems are completely
automated with signals being generated by software which examines market
conditions. Some of these services have a better track record than
others – it's a good idea to research them before signing up.
With any third-party signal provider it pays to know how the signals are
being generated. Since there are such a large number of market
indicators some of them may contradict each other. In addition, a
particular indicator may send out conflicting signals depending on the
time frame.
Market conditions also play an important part on the accuracy of
indicators. During upswings in the market, for example, trend indicators
will send out buy signals but longer-term oscillator indicators will
view the market as being overbought and send out a sell signal.
Generally speaking, trend indicators are most accurate during trend
conditions and oscillators are best during times of transition. Both
types of indicators are often in variance with the other.
To overcome these problems, try to find a signal generator that uses at
least 3 market indicators for verification. Signals that are verified by
3 different indicators are strong and tend to be accurate. It is also
important to look at signals from varying time frames. An upswing may
simply be a short term correction and the market may afterwards continue
its downward movement. Taking a broad view of market conditions allows
you to see these variations more clearly.
Depending on the type of stock trading system you sign up for, signals can be delivered by email on a daily basis,
available for viewing on a website, or be integrated into your trading
software so that popups appear on your screen for particular signals
that you are watching.
Companies which provide signals usually offer their services on a
monthly basis. Some are quite expensive – as high as several hundred
dollars a month. These are obviously aimed at the professional trader
but other services are also available at more reasonable costs.
The value of these stock trading systems has to be weighed by the individual investor. They can be a great time
saver but they may also encourage laziness when it comes to analyzing
the market. A knowledgeable trader should have the tools necessary to
judge the effectiveness of a signal system and do some of the
calculations himself to keep on top of the market.
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