Trading Software

What Is Trading Software?

Trading software facilitates the trading and analysis of financial products, such as stocks, options, futures, or currencies.

There are a wide variety of trading software packages available at all levels of trading experience and tailored to different markets (e.g., stocks vs. forex).

Understanding Trading Software

Often, brokerage firms provide their clients with trading software to place trades and manage their accounts. The software may be downloadable and launchable from a desktop or mobile device, or it may be web-based where the trader accesses the software via a website they log in to.

Traders can also purchase third-party trading software that supplements or enhances the software provided by brokerages.

Due to falling commission costs over the years, more traders and investors have moved to doing at least some of their own trading and analysis using self-directed trading accounts. This has increased the demand for software that provides trading capabilities, as well as analysis and information resources within the software.

Trading software can provide users with pricing information for assets, special order types, fundamental data, charts, technical analysis indicators, statistics, chat rooms, and other proprietary tools or functions that brokers and software developers use to draw traders to their service.

The availability of application programming interfaces, or APIs, has also helped fuel the trading software industry. APIs allow for two more pieces of trading software to be linked up, functioning as one. This allows users to access the benefits of multiple pieces of software. APIs are not always required, as a user could simply run the two or more programs independently on their computer, although the programs will not communicate with each other.

Types of Trading Software

There are different types of trading software with different features provided by both brokerages and third-party developers.

Some of the most common features include:

Choosing Trading Software

Before deciding on trading software, traders and investors should carefully consider what features they need. Active traders that rely on automated trading systems may choose entirely different trading software than an investor who is only looking for the ability to place trades.

Software applications may have different fee structures, performance characteristics, and other factors that impact profitability.

Most brokers and software developers allow potential clients to test out their software before committing to buy it or open an account with the broker. Take advantage of this by trying out several pieces of software. See which tools and features you like and utilize. Then weigh the pros and cons of the broker (if applicable) and their commissions.

If you like a particular broker, because of their low-fee structure for example, but you don't like their software, you may still be able to find third-party software that you can utilize through an API or independently.

For example, if you don't like your broker's charting capabilities, you could subscribe to a third-party charting service/software you do like, and utilize that in conjunction with your broker's trading capabilities.

Examples of Third-Party Trading Software

Most brokers have their own trading software, although some provide third-party software. For example, in the forex industry, many brokers have their own software, but many also provide MetaTrader4 and/or MetaTrader5, which is a commonly used third-party trading platform.

In the stock market, most brokers provide their own software. Here are some large brokers and their software.