Stock Market Timing Software
The lure of making money quickly has always been a draw to trading in the stock market. The traditional investment advice has been to buy stock in quality companies and hold it for many years. However, trading in the short term has recently become popular, with traders attempting to "time the market" and buy stocks when they believe the price will rise and sell when they believe the price has peaked. Such timing is difficult even for professional traders to do consistently. Market-timing software attempts to increase a trader's odds at making a relatively quick profit.
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Price Analysis
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Stock market trading programs range from free to very expensive. The software evaluates past and current prices of stocks in an attempt to identify patterns that may be signals indicating the near-term direction of the stock price. The term "technical trading" refers to examining price charts using any one of a number of strategies that uncover a directional trend. Such indicators include moving averages, Stochastics, Japanese Candlesticks and many others. Market-timing software programs may use one or more of these calculations in computing "buy" or "sell" recommendations, as well as incorporating other factors such as the movement of the market as a whole, as is indicated by the Dow Jones Industrial Index. In addition to running such programs on your computer, programs may require an Internet connection and a subscription to an online stock quote service.
Volume Analysis
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At least one market timing program bases its buy and sell recommendations on the current trading activity of the specific stocks under evaluation. The theory here is a simple one of "supply and demand." If a lot of traders are buying a stock, then there is a demand for the stock, and the stock price should begin to rise. Similarly, when traders are actively selling a stock, the stock's price will most likely trend downward. This type of market-timing software may be most beneficial to "day traders," those who plan to buy a stock and sell it before the end of the trading day, and to "swing traders," who typically purchase a stock with the intent of selling it at a profit within a few days or weeks. This type of software obviously requires a "real time" streaming connection to a stock-quoting system.
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Risks
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The best market timing software created by the best minds in the world is not infallible. The stock market can be quite volatile at times. While the right software can save you countless hours of manually evaluating stocks looking for prospective candidates, never forget that a trend can reverse at any time. This is especially true when a major news or financial event occurs. For example, a sudden recall of a popular pharmaceutical drug can cause a drug company's stock to take an unexpected drop in a matter of minutes. Never trade with money that you cannot afford to lose. Always do your homework to perform your own investigation into a company before blindly making a stock purchase based solely on the results of a computer program.
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References
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