The concept of day trading is associated with the stock market, although the term can be applicable to any market trading that opens in the morning and closes during the evening or afternoon. A software is used to track the market prices and indexes of one market, or a set of markets in a single day.
The software basically enables the traders and investors to navigate the enormous number of trades that take place in a single day. Let us try to understand the significance of stock exchanges, and the need for software in day trading.
Stock Exchanges and Day Trading
The concept of stock market has come into being as a result of the joint stock companies, or simply companies also known as LLC or corporations in some cases. Such companies tend to have a 'stock capital', that is divided into several hundreds and millions of 'shares'. Such a share or shares are held by several who are known as the shareholders.
The company pays these share holders some dividend as a profit-sharing return. Now the specialty of this share is that it can be traded against cash or other shares. For this purpose of trading stock markets with stock exchanges operate through out the world.
Apart from shares, other financial instruments such as debentures that are invested as capital in the joint stock companies are traded. The items that can be traded in a stock exchange vary from country to country. The market price of several companies' stock is used as a point of profit by the people, especially investors.
The common man has an access to this enormous stock market for a certain time period throughout the day, through certain stock brokers. The trading starts and stops at a specified time during all weekdays, which gives the transaction its nick name, day trading.
Now the three elements of any stock market and exchange, are stock brokers, company stocks and investors. In this scenario, you are the investor or the trader and the reason that you need a software, is that the number of investors and stocks that can be traded is enormous.
About Day Trading Software
The software used for day trading are often connected to your stock broker's line or the stock exchange. The countless software that are available across the globe are mostly Internet-based. The software can be either locally programmed as per the specifications of the nations compliance, or it can also have an international validity.
For example, a software in the US may be programmed according to the guidelines, laws, day trading rules and regulations of the US Securities and Exchange Commission. There are three principle functions that any software used for day trading can execute. As you might have guessed as it is a software, it is an online trading facility hence, a very good Internet connection is recommended.
The first function is that of data collection. Here the software amasses all facts and figures about the stock investing and the market conditions in general and report it back to you. There are several ways in which you can set and program the software, such as you can get only the updates of past one hour or the previous entire day trade.
There are also software where data is reported back on an every second basis. This kind of feature saves you time and you are able to make calculations as soon as you get the data. Executing the trade also becomes faster and as the early bird catches the worm, you might be the first one to buy or sell the stock at a new price.
The second aspect of any stock trading software is the process of charting the market values of shares, stock and instruments. The charting function reduces the time that you dedicate for stock research. Such a charting is very helpful due to the fact that the software not only charts the graph of the market price, but also tends to chart the predicted market value of specified stock, in some cases. Thus on the whole it again helps you to save time and the time between the incoming of data, and the decision to trade the shares is minimized.
The last prominent function of any software for day trading is the actual trade execution. This part involves conveying to the broker your decision to buy or sell after the market cost of a particular stock has reached a certain limit (also termed as scalp trading). For, this you will need the same software as your stock broker.
In this function the software takes the buy and sell decision as per your pre-instructed requisites. For example you preset the software to buy or sell 10 shares of XYZ company after the market value of one share reaches the limit $1000 (example fictitious). The day trading risks are however not eliminated by these software, and hence make it a point to know the software first, very properly, before using it for auto trade.
Avoid certain free software or unsolicited and unrecognized software as there have been fraudulent cases in the past. There are also certain software for beginners that one can used for understanding the concept of day trading. It would be best to consult your stock broker as he or she might recommend something really useful and advantageous.