How Graphs Can Help Traders to Improve Decision Making?

Not all traders make money in the market. So, why does it happen that some people earn profit in the stock market while others don’t? One of the main reasons could be inability to use graphs to improve traders’ decision making. Graphs are easy to understand and help traders interpret data at a glance. Moreover, EOD & Live graphs are unbiased and come directly from the source, which means there are no chances of misinterpretation or alteration from anywhere.

• Graphs are the fastest and easiest source that let you know about a particular stock and its market behaviors. Although, when you’re entering the market graphs alone are not enough but helps you significantly cut time and effort when it calls for quick decision making situations. 

 

• Graphs contain the complete historical background about a particular stock and helps traders in predicting the financial activity of the stock in the future. A professional trader can certainly temper financial trading decisions by using a graph system but for those who use it in isolation; they miss out on its full potential.

 

Example

 

For example, We all know that higher highs and higher lows mean a rising market. The trend is upwards. By properly analyzing these charts, graphs, various decisions and strategies can be formulated to help traders be at front at all times.

Conclusion

Usually, trading charts and graphs are used to mark market trends and entering the market without analyzing graphical background of the stock would be nothing but gambling your investments over a highly unpredictable and highly volatile market. Various traders have their way of using graphs but few uses, every trader can easily use is analyze price of stocks, rising and falling volumes, support & resistance levels  etc. Because traders can’t memorize entire data, trend of all stocks but graphs contain & show the entire data. These graphs and charts are definitely dependable indicators of all the factors that affect the market.



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Technical Analysis Softwares Specialities

What are the specialties of Technical Analysis Software's?

We know that technical analysis software's help in the effective analysis of the stock market movements. These software's are equipped with lot of specialties and are highly robust in their actions. The functions of these software's can be briefed into following- 

• The software’s are decision making terminals which helps traders and investors take the right trading decisions. 

• They give every trader with the power to automatically track important market movements and analyze the market in real-time.

• They help analyze the Currency Market in real-time.  

• The software gives us Buy & Sell signals that will help you make the right decision regarding various stocks that we have, or those that we could be interested in.

• They automate the charting, analysis and reporting functions that support technical analysts in their review and prediction of financial markets (e.g. the stock market).

Features of Technical Analysis Software's

There are many features of Technical Analysis Software's. But the one which can help traders with all the above mentioned points are the real winners. There are many software's which are dominant in some features like Back testing, Optimization etc but are not very effective in some other features like providing buy/sell signals etc. In such cases, a combination of one or more software's packages are needed to build a fully automated trading system. Some of the features that Technical Analysis Software Packages provides are as follows

Charting
  
A graphical interface that presents price, volume and technical analysis indicators through a variety of visual interfaces such as line, bar, candlestick and open-high-low-close (OHLC) charts. The chart data is presented as a time series and users typically have the ability to view historical data with varying interval (sampling) periods. Interval periods range from seconds through to months; short term traders tend to use frequent interval periods, such as 1 minute i.e. the price data is updated every 1 minute, whereas longer term traders tend to use daily, weekly or monthly interval periods when trying to identify price and technical analysis trends. Some charting packages enable users to draw support and resistance trend line or for example Fibonacci retracements to help establish trending patterns.

Back testing

Enables traders to test technical analysis investment timing strategies against historical price movement for one or more specific securities. Strategies are compared to each other using diverse performance measurements such as maximum draw down, annual profit. The objective is to try and develop a trading strategy based on technical analysis indicator criteria, which will generate a positive return. 

Optimization

It is a process of testing technical analysis indicator parameters, with the view to developing an investment strategy that generates the maximum return based on historical price movement. The optimization process is achieved through the fine-tuning of the associated technical analysis charting parameters. Typically technical analysis indicators have a range of parameters that can be adjusted, such as the interval period and the technical analysis indicator variables. For example the stochastic indicator has four parameters that effect its results: %k, %d, slowing period, interval period. Back testing of an over-optimized system will perform real-time. One way to remove over-optimization is by carrying out optimization on historical data and then performing future testing (sometimes referred to as 'out of sample') before making a final evaluation of a trading strategy.

Scanner

Scanners enable users to 'scan' the market, be it stocks, options, currencies etc., to identify investment opportunities that meet a user's specific investment criteria. Using a technical analysis scanner, a user could, for example, scan the market to identify oversold stocks that have stochastic and RSI value of less than 20% and 30 respectively.

Alerts

Alert software is used to monitor specific equities, such as stocks, options, currencies, warrants, etc., and provide a notification of when specific price, volume and technical analysis investment conditions are met. As an example, a person who uses technical analysis might want to be notified when the RSI indicator rises above 70, followed by the price falling below its 20 day moving average; using alerting software the user will be able to create an alert, which will provide a notification of when the technical analysis investment conditions are met. When alert conditions are met, a notification is typically communicated via an on screen pop up or sent as an email, instant message or text alert (to a mobile phone).

Custom indicators

Most technical analysis software includes a library of standard indicators (e.g. moving averages and MACD). Some software will also provide a mean to customize, combine or create new indicators.

Data feed

Technical analysis software is typically used with end of day (EOD), delayed or real time data feeds. EOD data feeds provide the end of day closing price for the given equity and is typically updated once a day at market close. Delayed data is typically delayed 15 to 30 minutes depending on the exchange and is the most commonly used data feed type. Real time data feeds provide tick by tick 'real time' data. Real time data is licensed on a per-exchange basis whereas delayed data is typically purchased on a regional basis, such as US markets, rather than an exchange basis.

Broker interface

Some technical analysis software can be integrated with brokerage platforms to enable traders to place trades via a user interface that they are familiar with. Typically these software providers try to differentiate themselves from the brokerage software through enhanced features such as automated trading.

Conclusion

There are many technical analysis real time data providers. But very few are genuine when it comes to maintaining standard quality for parameters like quality, price, after sales service, data accuracy, integrity etc. If you have always wanted accurate technical analysis on the stock market, but have not yet been able to find out the right way to do so, then www.rtdsdata.com or RtdsData Software may hold the key for you. Rtdsdata is one of the most comprehensive software out there in the market. It is almost like hiring a stock broker of your own who keeps you updated with the real time analysis of various stocks in the market.

 


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Parabolic SAR

What is Parabolic SAR?

The Parabolic Stop and Reverse (SAR) indicator combines price and time components to generate buy and sell signals. The Parabolic SAR is also effective as a tool to determine where to place stop loss orders. 

Parabolic SAR Buy Signal

We should buy when the price closes above the upper Parabolic SAR. When the Parabolic SAR changes from being above price to below price, then the stock, futures, or currency trader should "stop" and buy to cover their existing short sell and "reverse" direction and buy to go long.

Parabolic SAR Sell Signal

A sell signal is generated when the price closes below the lower Parabolic SAR. At the time that the Parabolic SAR changes from being below price to being above price, the trader should "stop" and sell to exit their existing long trade and "reverse" direction and sell to go short.

Uses of Parabolic SAR 

An effective use of the Parabolic SAR is determining where to place stop loss orders to protect profits or minimize losses. 

The Parabolic SAR is an effective stop loss placement tool for two reasons:

• It acts as a trailing stop. Rather than putting in one stop loss below where a trader entered a long position or above where the trader entered a short position, using the Parabolic SAR as a trader's guide, the stop loss is gradually raised for a long position and lowered in a short position, effectively locking in any profits.

• It acts as a time stop. Time stops are used by traders because they enter in buy or sell orders expecting a certain move to occur. If the expected move never occurs and the reason the trader initiated the trade is no longer relevant, then the trader should exit their trade. Similarly, the Parabolic SAR incorporates time into its calculation making sure a stock, future, or currency trade is working for the trader, if the trade is not moving in the desired direction, the Parabolic SAR will signal an exit.

Parabolic SAR Weaknesses

Parabolic SAR introduces some excellent concepts to technical analysis but leaves two major weaknesses:

• Trend speeds vary over time and between stocks. It is difficult to arrive at one acceleration factor that suits all trends -- it will be too slow for some and too fast for others.

• The SAR system assumes that the trend changes every time a stop has been hit. Any trader will tell you that your stops may be hit several times while the trend continues. Price merely retraces through your stop and then resumes the up-trend, leaving you lagging behind. 

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