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Savvy financial traders have long shrugged off the pencil and ruler as their primary tools for technical analysis, and embraced high-powered software to take the grind out of research. For individual or part-time traders the key questions over whether to use software relate to how much you are prepared to pay, and what tools you need and want in return.
With this in mind, Shares is profiling four investment software providers for your benefit, filtering out the white noise thrown up certain popular internet search engines and also provides a summary of the pros and cons of each platform.
‘The quality of data varies massively between paid-for software and the stuff that’s given away on the internet,’ says Tim Clarke, general manager at ShareScope, winner of the Best Investment Software Program category at the Shares Awards for 12 years running. ‘What you should be looking for is a guarantee of accuracy and reliability. The quality of that data is going to determine how successful you are when risking your money in a trade.’
Portal power
In this article you will find portraits of ShareScope, eSignal, MetaTrader and Vantage Point software, all of which are used to effect by profitable and experienced traders. While all have similarities in their offerings, they can also be differentiated on a number of points, which means each will have appeal to different types of traders.
Equity punters may have different demands to foreign exchange (forex) traders; part-time traders may have different requirements than professional players. Strategies vary between them all.
‘A good trading platform is still high on the list of requirements, although this alone is no longer the main criteria,’ says Gaies Chreis, chief operating officer at MetaQuotes Software, the company which developed MetaTrader.‘In addition to having a convenient and functional platform, there is now a requirement for powerful automated trading, mobile applications and other additional services.’
One of the chief dangers in technical analysis is placing trades on the basis of incorrect, out of date or incomplete datasets. These issues are all too frequently encountered with certain bottom-feeder providers on the web.
‘Speaking from personal experience, there is nothing worse than forming a positional view and later finding out that the data you’ve used is old,’ says one trader, outlining the reason for his shift to paid-for software.
Then there’s the question of how much you are prepared to fork out for such software, keeping in mind that an outlay is perhaps more akin to an investment than an expense.
‘If you are going to invest your future financial security, you need to be doing so based on informed financial judgement,’ says David Watts, general manager of desktops, EMEA at Interactive Data, provider of the eSignal platform . ‘You need to make decisions based on sound financial due diligence with appropriate investment software, be it ours or somebody else’s.’ (Click on image to enlarge).
Technical approach
Technical analysis is a mainstay of traders and speculators in financial assets - including stocks, forex and commodities. It doesn’t matter much whether your bent is for vanilla stocks or derivatives, speculative investing or portfolio building.
Technical analysis is the key reason why traders use investment software; they can have access to all the latest data, news, tools and features at the click of a button. The technique involves the forensic examination of a given asset’s pricing and trading volume, based on a fine blend of real time and historic data. By contrast, fundamental analysis assesses other facts, such as corporate and macro news, relating to a given asset class, whether on an individual basis (stocks, for instance) or as a group (indices, for example).
Exponents of technical analysis are most interested in the price movements of a given asset class. In that sense they are assuming the price of a quoted asset reflects everything that is relevant to it. It further assumes that everything from corporate news to analyst opinion, and from financial results statements to price volatility, has been factored in by the market.
‘It’s said that you should buy the rumour and sell the fact,’ explains Interactive Data’s Watts, adding that the market’s reaction to rumours can be seen in the ebbs and flows of intraday charts, and thrown into relief by the various tools available on investment software.
In using technical analysis, traders are seeking to divine the future price of an asset, whether as an extension of an existing trend, the start of a new one, or something in between. The pricing could go long, short, or sideways. It might be volatile, it might not.
Traders seize upon the potential future direction of price by using historic data to extrapolate what might happen next, taking carefully selected positions based on the same. The adage that history can potentially repeat itself is apt, albeit somewhat qualified.
‘It is interesting to note that, since the increase in popularity of spreadbetting, most traders are still looking for investments that involve the price going up,’ says Clarke of ShareScope. Even still, spreadbetting allows traders to take profits on price moves in either direction.
By contrast portfolio builders and longer-term investors are looking for capital gains and potentially an income stream from their trading activities.
Broad capability
When it comes to investment software, you will want a platform that offers up a broad palette of functionality. Most importantly you will want accurate, timely and in-depth data, and algorithms that reliably analyse a given stock, forex pair or commodity, among others.
You will want to be able to view data in ratio form, which in the case of stocks might include their beta, price/earnings multiples, return on capital employed, and so on. You’ll also want to view graphic representations of these, perhaps comparing one with another, ideally to reveal some signal that could drive profit.
To achieve this you will need an arsenal of charting tools at your disposal. These include a wide range of displays (line, candle, bar and so on) to give you a visual representation of what’s going on. It’s easier to spot trends and patterns on charts, as opposed to screeds of data.
Charts need to be flexible in so much as you can compare and contrast different assets (maybe one stock or index against another, or perhaps two currency pairs). Being able to plot and extrapolate price, as well as support and resistance levels is critical.
It’s always worth checking what your money will buy you in terms of charting muscle. You should demand a wide range of historic and intra-day charts that can plot momentum, oscillation, trend, volatility, volume, moving averages, Bollinger bands, and Fibonacci numbers.
If you are not sure what you’re buying with a given piece of investment software, don’t be shy about contacting the provider to get the answers you need. Importantly, you should
also be looking for a software provider that has a range of educational and training resources, whether online, over the phone, or via seminars.
ShareScope
UK-based ShareScope offers a trinity of software packages to suit a range of traders, from those dabbling in the markets occasionally, to those who make investing a full-time business. The PC and Mac-friendly software, which is designed to meaningfully and flexibly research a range of financial asset classes, has won the Best Investment Software Program category at the Shares Awards for 12 years on the trot.
‘The whole point behind ShareScope is to make the process of research easier, allowing investors or traders to undertake a lot of work in very little time,’ says the company’s general manager Tim Clarke. ‘The result is better performance.’ The software packages are Gold (£20/month, £220/year), Plus (£40/month, £440/year), and Pro (£99/month, £990/year). In addition there is a one-off membership charge of £79.95.
You can also bolt on access to comprehensive Level 2 data to the Gold and Plus subscriptions at £170 a year, or £16 a month. It is bundled with the Pro package. The London Stock Exchange’s (LSE) Level 2 feed provides comprehensive ‘behind the billboard’ data on trading activity.
What you get for this outlay is a rich selection of customisable features, data, and charting types, with access dependent on your level of paid subscription. With the Pro package you’ll enjoy live pricing for UK and US stocks and indices as well as data for all the main forex pairs, key commodities, futures, covered warrants and exchange-traded funds (ETFs). You’ll also be able to get prices for unit trusts, Gilts, corporate bonds, commodities, open-ended investment companies (Oeics) and investment trusts.
The Plus package offers up the same, but prices are delayed, whereas with the Gold option data and prices are updated daily. There are too many charting tools to list fully; with the Pro and Plus packages you have the whole range at your fingertips. With the entry-level Gold subscription you don’t have access to intraday charts and indicators, or spreads. For a comprehensive and comparative list of features go to: www.sharescope.co.uk/compare.jsp.
‘We put a huge amount of effort into making sure our data is extremely accurate and doesn’t have glitches that can screw up your support and resistance analysis, and trigger your alarms and stop losses,’ says Clarke. He adds that about 70% of clients opt for the Gold version, which allows them to comprehensively and comparatively research and chart US and UK stocks and indices.
Of these, spreadbetters and longer-term investors, such as portfolio builders, alike are primarily interested stock market, forex or commodity data, Clarke explains, noting the big-screen benefits of conducting research on desktop computers.
ShareScope is a research and analysis tool only. You will have to place your trade elsewhere, usually via a stockbroker or retail derivatives broker, although the platform is exploring integration options with brokers.
The interface varies between packages. You can set filters, keep tabs on individual investments, build portfolios, get snapshots of financial results, key metrics and ratios, analyst and broker views and forecasts. There is full transparency on transactions. ShareScope’s news is provided by Dow Jones.
ESIGNAL
US-based Interactive Data bundles its eSignal (www.esignal.com) software packages into four categories, targeting the whole gambit of investors, from greenhorn to greybeard. The PC-compliant software packages are OnDemand ($45/month, $491/year), Premier ($145/month, $1,572/year), Premier Plus ($215/month, $2,340/year), and Advanced Get ($295/month, plus one-time cost of $3,995).
The key differences between each lie with data access and features. The OnDemand and Premier subscriptions are most popular with retail investors.
‘With the OnDemand product you don’t get live stream pricing. It is delayed by 15 minutes, but you can choose to have real-time price data if you want it,’ says Interactive Data’s David Watts, noting the other packages have real-time pricing data.
The more you pay over your basic OnDemand subscription, the more you get. OnDemand doesn’t include Level 2 data, ‘But the average trader doesn’t really need that for their investing activities,’ Watts explains, noting equities and forex are the most popular asset classes among subscribers.
What you do get is access to data from exchanges around the world, with all four subscriptions including at least stocks, futures and forex. Options are available with the Premier Plus and Advanced Get packages. With all packages you also get advanced and speciality charting facilities, allowing technical analysis and the ability to place orders through charts via a right click of the mouse.
All platforms are integrated with a large range of brokers, although most specialise in futures over equities and forex, the company’s website shows. Expect to pay relevant exchange fees in addition to your subscription.
There are a number of different ways you can ‘click to trade’ within the software, including via charts, but investors must have an account with a brokerage whose platform is integrated into eSignal. ‘We don’t connect through to spreadbetting companies as brokers,’ explains Watts.
You also get the ability to create watch and hot lists, access historical data, and set any number of bespoke filters and alerts. It is possible to back test and optimise strategies on the real-time subscription, but not OnDemand. You have access to trading education and support. A mentoring facility is included with Advanced Get.
All workspaces are customisable, which means subscribers can lay out their preferred functions and tools as they choose, making their interaction with the software more straightforward. eSignal offers access to newsflow as a bolt-on option with Premier, Premier Plus and Advanced Get solutions, and you can expect to pay at least $10-$159 a month depending on what news provider and package you choose; the more you fork out, the more you get.
‘What we find is that more sophisticated traders are interested in subscribing to news feeds,’ says Watts, adding the OnDemand package includes a basic news service. ‘Part-time traders often want to source news about a financial instrument from several sources,’ continues the Interactive Data man, commenting that with eSignal traders can build a bespoke investment software platform that entirely suits their needs.
METATRADER
MetaTrader4 (MT4) and MetaTrader 5 (MT5) are all-around trading platforms designed for investors who are interested, primarily, in taking positions on forex. Whereas MT4 is designed for forex and futures markets, MT5 broadens that mix to include stocks and options.
Essentially MetaTrader provides a platform which investors can use to research trading ideas and the broker will execute them, whether in the form of a Contract for Difference, spreadbet or futures contract.
Both platforms are the creation of Cyprus-based MetaQuotes (www.metaquotes.net) and provide all the tools required to analyse price over multiple timeframes and on numerous flexible charts. They facilitate both technical and fundamental analysis, and offer up financial newsflow and an economic calendar.
The way traders access it is via a MetaTrader-capable broker, which has integrated it into their online platform. IG, for instance, offers clients access to MT4. The trader interface is customisable. MetaQuotes says on its website that the software represents the ‘all-in-one concept and combines everything you need’ to trade in the financial markets.
‘Trading, market analysis and automated trading are integral parts of the forex trading software,’ explains the literature. ‘It enables traders to work not only with the forex market, but also trade options, futures and [in the case of MT5] stock markets.’
In both versions of the software traders have access to multiple tools, including graphic objects and technical indicators that allow careful analysis of financial assets, over several timeframes, and via a large number of chart types, through which you can place trades.
The software supports four types of order execution: instant, request, market and exchange execution. All types of orders are available, including market, pending and stop orders.
In terms of stocks, future and options, MT5 has gateways to 10 exchanges, but for equities traders it is worth noting the London Stock Exchange, New York Stock Exchange and other major European bourses are not among them.
With a simple click of the mouse you can undertake trade operations, alerts, technical analysis, and fundamental analysis. You can also use automated trading programs, a multi-currency strategy tester, trading signals and a lot of other useful tools.
The software is designed to be used on both desktop computers, and on mobile devices, which is a welcome feature for traders and investors who want 24/7 access to the markets.
VANTAGE POINT
US-based Market Technologies joins the gaggle of platforms with its Vantage Point application, the brainchild of investment software pioneer Louis Mendelsohn.
The program - which is widely reviewed online - is based on what is billed ‘neural network technology’, a form of so-called artificial intelligence. It promises to predict the future direction of financial markets with ‘up to 86%’ accuracy by sifting through screeds of data for hidden patterns and correlations.
As inter-market relationships or markets change, the program updates formulas. Since security prices are in a constant state of flux, this quality is critical to any successful trading system.
It analyses the data with multiple neural networks to find the related markets that most affect prices of your target asset. Market Technologies says the software further quantifies the degree of influence these related markets have, and then uses that information to forecast trend direction, market strength and daily trading ranges in a simple-to-read chart and report.
‘You have a complete forecast for the market you are trading in less than five minutes,’ explains Market Technologies’ website TraderTech.
The patent-pending software comes in a number of packages, each targeting a different asset class. Options covered include futures and commodities, exchange-traded funds and currencies as well as UK, US, Australian, Canadian, and Indian equities.
Vantage Point is priced according to a tiered system, and the amounts are clearly linked to the novelty of having access to the neural network technology and all that it promises. The minimum cost of the software is $2,900, which includes analysis of three markets. The prices ramp up quickly thereafter, depending on how many markets you want to access, before stopping out at about $8,900. After your initial order, each extra market costs $1,900. For a detailed breakdown on what you get see: www.tradertech.com/vantagepoint/
The company provides any of more than 70 predictive filters to identify trades. These include moving averages, moving average convergence/divergence indicators, differences, next day high/low signals and neural, stochastic, and relative strength indices. For instance, the predicted neural index tool compares a current three-day moving average with a predicted three-day moving average, forecasting whether a given asset’s price will be up or down in a couple of days’ time.
Importantly, you will still need to develop you own strategies on how, when and why to trade. The software is not a trading platform.
Select the right platform for you
Of the four investment software programs profiled, each offers the trader a range of functionality that will suit most needs. The software that you end up selecting will come down to personal preference, itself based on experience and investment track record.
For those who are looking for an all-in-one trading platform, eSignal comes up with the goods, allowing you to both research and place trades without leaving the environs of the application. There is some flexibility in how you can place trades.
By contrast, ShareScope prides itself in being a one-stop research shop, which means you will need to have a trading account with, say, a brokerage or spreadbetting outfit that offers execution services. This is certainly no bad thing, and many traders like to do the due diligence without being prompted to get some skin in the game at every turn.
With both of these software programs you have to do the work, and each offers a comprehensive suite of easy-to-use tools for, primarily, technical analysis across a wide range of asset classes, among them stocks, forex and commodities.
MetaTrader continues to be popular with currency traders around the globe, and it certainly offers up a lot of trading features. The latest edition, MetaTrader 5, is welcome for its addition of stocks, but it is fair to say forex remains this software’s forte.
Vantage Point, which is not a trading platform, also boasts an increasingly wide range of assets that you can gauge with its so-called neural network algorithms. As with any crystal ball offer, clear-headed caution and extensive due diligence are advised before parting with your cash.
In terms of pricing, ShareScope and eSignal offer great value for money. In the case of eSignal, its flexibility in allowing you to pay for what you use is pleasing. There’s nothing worse than having to part with good cash for a bundle of services, but find you use only some of them.
It is fair to note that ShareScope’s and eSignal’s entry-level packages, which happen to be their most popular, are broadly comparable in terms of pricing. eSignal costs a bit more, but it has the added bonus of being a trading platform. MetaTrader is available to retail traders via various brokers and derivatives outfits, and usually for free, barring your own trading costs.
Vantage Point’s $2,900 entry level package is a good deal more expensive, but you would be paying for its proclaimed accuracy of up to 86%. As a trader, given the upfront cash required, you would want to be on the profitable side of that equation more often than not.
