Technical Analysis and Charting Software
by Wayne A. Thorp
Technical analysis is the study of price and volume data in order to identify patterns that may be used to time buy and sell decisions. This can involve over a thousand data points, even when considering only the daily open, high, low, and close price and daily trading volume of a security for only one year. Luckily, the power and affordability of computers allows investors to generate price charts with a variety of indicators in the blink of an eye instead of having to manually plot this data. Today, individuals have a bevy of choices of technical analysis software and Web sites at their disposal to perform a multitude of tasks, from simple price plotting to complex system development, testing, and optimization.
In fact, there is perhaps no other category of investment software that offers a more diverse collection than the realm of technical analysis software. Even Mac users, who are commonly faced with a limited number of investment software titles from which to choose, should be able to find a program that suits their needs. There are scores of programs on the market today, ranging from basic charting software to programs that generate buy and sell decisions based upon astrological cycles. Faced with these many choices, it is important to identify what types of analysis you wish to perform and choose a program that performs those functions. Before you decide on a software package, however, is a good idea to familiarize yourself with the features and functionality of various software packages to find one that meets your particular investment and analysis needs.
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Long-time CI readers may notice that this article excludes some technical analysis programs that have been covered in the past. When putting together this years list, our goal was to choose packages that the typical individual investor would use. The intent of this comparison is to introduce you to some of the more popular mainstream technical analysis and charting programs currently on the market; for a comparison of the on-line services, see the March/April 2005 issue of Computerized Investing. The 21 programs included in this comparison (some programs come in multiple versions) all analyze stocks, provide some level of charting, and contain technical indicators. Furthermore, each of the programs can be used for end-of-day analysis, while some also handle intraday data, either on a delayed or real-time basis.
The comparison grid examines the features and functions that many of these programs have in common. The features outlined in the comparison grid are those that a comprehensive, robust technical analysis program should provide. Furthermore, Table 1 outlines some of the more popular technical indicators and drawing tools each program has to offer. The information in the comparison grid and Table 1 has been provided to us by the respective companies and has been confirmed by hands-on use of the programs. However, it is a good idea to verify the information before buying. Reviews of individual programs are listed on this page below, and ratings are presented in Table 2.
|WHAT TO CONSIDER|
A common, and serious, mistake made by those buying technical analysis programs for the first time is to overlook the importance of data in the analysis process. Technical analysis, by definition, is the plotting and manipulation of price and volume data. Therefore, without data a technical analysis program is as useful as a car with an empty fuel tank. Furthermore, it is important to use reliable, or clean, data in order to generate reliable results. Finally, be sure to budget for the cost of data as well as the program itself. Many readers are surprised that they have to spend, potentially, hundreds of dollars for technical analysis software, and then have to pay for data on top of it.
The following are some other data issues to consider when purchasing a technical analysis program.
Data Types Used
Price and volume data, the basic inputs used in technical analysis, are divided into two broad categories: end-of-day (EOD) and intraday. Ultimately, your investing time horizon will dictate which you require. End-of-day data summarizes trading activity during the course of the day and usually consists of the opening (first trade) price, the range of trading with the lowest and highest transaction prices, the closing (last trade) price, and the total trading volume (number of shares or contracts bought and sold over the course of the regular trading day). Investors with a longer-term investment horizon are typically satisfied with end-of-day data.
Intraday data, on the other hand, is updated throughout the trading day—either on a real-time or delayed basis. More active investors and traders tend to need access to this more timely data to monitor movements in the markets. Beyond handling price and volume data, some programs recognize the role that fundamental analysis can play in the investment decision-making process. As a result, some programs may provide additional data such as earnings and revenues, growth rates, and financial ratios and multiples.
End-of-day technical analysis programs typically will offer a historical price and volume database. What differentiates one program from another is the breadth (number and types of securities covered) and depth (number of years of price and volume data provided) of the data. Real-time programs should also provide a database to plot historical charts. An adequate historical database is a prerequisite for programs offering trading systems and the functionality of backtesting these systems. Programs that do not offer a historical database require you to seek a third-party source of data—often at additional cost—in order to develop a suitable database for backtesting.
Many technical analysis programs use data from third-party providers, which means you must select a data provider in order to use your program. Programs vary in their support of data vendors. Investor/RT from Linn Software now supports nine different data services (data feeds).
Some companies offer a completely self-contained package, where the user pays a single monthly or annual fee for use of the program and access to data. In these instances, you cannot use data from another source. TeleChart 2005 and ProphetStation are two self-contained programs.
Those wishing to shop around for a data vendor are not able to do so when the program only supports a single data source. While this is not necessarily a reason to pass on the purchase of a program, be aware that, in these instances, you are tied to the data the program is compatible with along with its quality (or lack thereof), as well as the fee structure for that data. The comparison grid indicates which data services are compatible with each program.
Some programs give you the flexibility of retrieving data on a fixed schedule without having to manually initiate the download process. With programs such as MetaStock, you specify when and how often you want data updates, and the program will log on to the data servers, download the data, and then log off (disconnect).
Data Import & Export
If you are looking to upgrade an existing technical analysis program, you may wish to make note of the data formats that can be imported into a different program or a newer version of the same program. This is especially true if you have already built up an extensive database of historical data, as you may be able to transfer existing data to use with the new program. This functionality can save you time and money by not forcing you to start completely from scratch. Numerous programs support data importing of TeleChart (Worden) and MetaStock data formats as well as ASCII and CSV text formats.
Data merging gives you the capability to bring together the data of two or more securities to create a custom index or security. For example, you can merge the prices of Google and Yahoo! to create an Internet index. AmiBroker and Insider TA are among the programs highlighted here that offer this functionality.
The most common chart types are bar and line, and most of the programs highlighted here offer these chart types. Line charts typically plot the close (last trade of the day) over time, while bar charts can show up to four data pointsthe open, high, low, and closing prices for a given time period (day, week, month, etc.). Some of the other charts you may come across include candlestick, equivolume, and point & figure. Be sure the chart types you use in your analysis are supported by the program you select.
A chart template or layout allows you to specify the characteristics of a chart, such as the time period displayed, data periodicity—daily, weekly, monthly, etc.—chart type, and any indicators or drawing tools you wish displayed. Programs that allow you to create custom templates generally allow you to save them for future use as well.
Templates are especially useful if you view multiple securities in the same manner. Instead of having to specify the chart characteristics for each security, all you need to do is specify the security and apply the template and the program does the rest.
A technical indicator is the mathematical manipulation of price and/or volume data, which is then usually displayed in a graphical manner. The number and type of indicators built into a program are important factors to consider when selecting a technical analysis program. However, it should not be the sole consideration. Instead, the emphasis needs to be on ensuring that the program includes the indicators important to your analysis—more is not necessarily better. Do not automatically write off a program just because its indicator library is not as robust as other programs. Programs such as InsiderTA provide unique, proprietary indicators—those developed and marketed in house and not found in other software packages—that you may find interesting. It is helpful to take a moment to consider your analysis needs when assessing the number and type of indicators you will require in a program. The more you wish to experiment with different trading strategies, the greater your need for a program with a more extensive set of technical indicators.
Beyond providing a set of predefined indicators, with default values used in calculating them, the ability to modify indicators to fit your particular trading needs and style is a useful feature. Modifications allow you to adjust factors such as the number of time periods used in calculating a given indicator. For example, the most common time periods for a daily moving average are 50 and 200 days, but programs allowing modification of indicators allow you to adjust to the period you are interested in.
Beyond making use of the predefined indicators that come right out of the box, savvy technicians may follow technical indicators they have created themselves. Trade publications such as Technical Analysis of Stocks & Commodities regularly publish new indicators or variations on existing indicators. Some of the more advanced programs allow you to create custom indicators. While the methodology differs across programs, in general, you enter a formula into a spreadsheet-like module or use a wizard that walks you through the process.
Table 1 details many of the popular indicators each program offers as well as the overall number of indicators supplied by each program. The comparison grid indicates whether a program allows for modification of existing indicators and whether users can create custom indicators.
Screening & Alerts
Screening is the method of taking a large universe of securities and narrowing it down to a more manageable number with similar characteristics. Technical screening involves locating securities that exhibit certain technical properties, such as price and/or volume behavior, moving average breakouts, or overbought or oversold conditions based on various indicators. Users are typically able to specify both the universe they wish to screen and the criteria they wish to use; the program will then generate a list of securities matching the criteria. Depending on the program, such as TeleChart 2005, you may also be able to perform screens using fundamental criteria.
Another useful feature is the ability to receive alerts when certain technical events take place. Programs may give you the option of selecting groups of securities to watch—such as those held in a portfolio or a watch list of stocks—and then alert you when any of the prices move by a certain percentage (up or down), or if pre-determined price levels are met. These alerts can take the form of on-screen pop-up windows, E-mail alerts, or a message sent to a pager, cell phone, or hand-held device.
Ultimately, most investors using technical analysis are looking for insight into timing for buy and sell decisions. Trading systems apply a set of trading rules (buy, sell, short, and cover) and automatically indicate when these rules have been triggered. The trading rules can be a single indicator or a group of indicators matched to specific conditions. Generally, you will tend to find trading systems with only higher-end technical analysis programs.
Backtesting a system involves applying it to a historical collection of price and volume data. Users specify the time period and the backtesting provides an indication of how a trading system would have performed over the backtesting period. Eleven of the programs in this article offer some type of technical trading systems.
To complement this functionality, programs offer system reports that provide such measures as rate of return, performance relative to buy-and-hold, maximum drawdown, and the profitability of each individual trade. These reports allow you to see which transactions would have been made as well as how successful and risky the strategy would have been over a given timeframe. The ability to rank and compare trading system performance is a valuable tool, as you are able to see how different systems perform in different market conditions.
When backtesting a trading system, it is important to implement assumptions that mimic the real world as closely as possible. To add realism to a trading system, and provide more realistic performance statistics, programs allow users to account for such items as slippage (the amount by which a security price may move between the time you place an order and when it is actually filled) and broker commissions. Other items to consider are stop-loss methods, user-defined entry and exit points, and whether you wish to trade on long positions, short positions, or both.
It is easy to fall into the trap of thinking that what has happened in the past can be extrapolated into the future. However, it is important to keep in mind that backtesting only informs you of how the system would have performed over a specific time period, if the system had been traded exactly as it was defined. There is no guarantee that these identical conditions would exist in the future, or that you would be able to mechanically trade the system without letting your emotions take hold.
As with indicators, some programs allow you to modify existing trading systems to better suit your trading style. In addition, a few packages allow you to build systems from scratch using proprietary programming languages or wizards that walk you through the process. Once you have created a new trading system, you should be able to backtest it just as you would a predefined system. The final element of system backtesting is optimization, where the program identifies the optimal variables that generate the highest gain or smallest loss for a trading system over the test period. For example, assume a system that buys when the price closes above the 50-day moving average and sells when the price closes below the 50-day moving average. With system optimization, the program will test a set of period lengths used in calculating the moving average to find the period that yields the best performance. However, be aware of the popular saying regarding optimization: You can torture the data until it tells you what you want to hear. All but three of the programs here that offer trading systems—HotlineX, Investor/RT Pro and Personal Hotline—also offer system optimization.
|TECHNICAL ANALYSIS PROGRAMS|
AmiBroker Standard & Professional
AmiBroker is a newcomer to our comparison, but it has been a solid competitor in the market for several years. This program offers a healthy array of features—including screening, custom indicator building, and trading system backtesting, development, and optimization—for a fraction of the cost of other programs with comparable functionality. In addition, the softwares makers claim that AmiBroker is capable of handling virtually any exchange in the world.
This Windows-based application comes into two versions—Standard and Professional. The main difference is that the Standard version handles end-of-day data, while AmiBroker Professional is a real-time version. Between the two, you have one of the largest collections of compatible data services—nearly 20 for end-of-day data. The program can download data from such free end-of-data data providers as Yahoo! Finance, MSN Money, and Brite Futures, which can save you the literally hundreds of dollars needed to acquire an entire database from a fee-based service.
AmiBroker offers the typical line, bar, and candlestick charts and provides a choice of over 60 technical indicators and drawing tools. The indicators are modifiable as well. One feature we wish the program did have is the ability to specify a date range to plot data.
Using the AmiBroker Formula Language (AFL), users can create custom indicators, as well as scans and trading systems. The language is a little cumbersome at first, so plan to spend some time mastering it. However, there are some unique features, including writing in market commentary for an indicator. The Guru Advisor Commentaries offer full-text descriptions of market conditions and generate automatic buy and sell arrows on the price chart. To help you with the custom indicator-building process, registered users have access to an on-line library of over 100 custom indicators. You can scan the price histories of securities to identify buy and sell signals that match your trading rules. There are also explorations that search the database and generate a list of symbols that match specified criteria. Setting up your own scans and explorations also requires knowledge of the AmiBroker Formula Language.
For system backtesting, AmiBroker allows you to test systems on portfolios of symbols as well as to optimize a trading system. The program also generates backtest reports that highlight such things as a systems net profit, average win and loss percentages, and maximum drawdown.
Users wishing to speak to a support technician will be disappointed that AmiBroker only offers E-mail support. However, most outlets report responses within 24 hours. There are also several active message boards at Yahoo! Finance, and the AmiBroker Web site features numerous video tutorials along with an archive of the AmiBroker Tips newsletter.
Measuring on a purely feature-to-cost basis, AmiBroker is hard to beat. But the program is somewhat less intuitive when it comes to using its more advanced features compared to other programs discussed here. The time and effort required, however, is worth the money you will save on the program and, perhaps, the data.
HotlineX, Personal Analyst, Personal Hotline, & Pro Analyst
Trendsetter Software has been living up to its namesake for many years. The company has spared numerous Mac users from the oft-voiced frustration of a lack of software for their investment analysis needs. With a new addition to its product mix, Trendsetter now offers four technical analysis programs—Personal Analyst, Pro Analyst, Personal Hotline, and the new HotlineX. The programs offer many of the same features, but as you advance through the product line, the features and complexity of the programs expand.
Both Personal Analyst and Pro Analyst offer many of the same features, including the ability to create bar, line, candlestick, and point & figure charts. With both programs, users have around 40 indicators and studies from which to choose. Analyst can identify significant candlestick patterns and provide explanations of the patterns.
The Analyst software also offers computer-generated trendlines that automatically track and chart significant highs and lows. The one drawback, however, is that you cannot plot your own trendlines. Other studies that the program can plot automatically include Fibonacci, Gann, and speed lines.
With Analyst, users can perform technical screening—you just specify the criteria you are interested in and the program scans the database of stocks for those that meet your rules. Furthermore, you can apply multiple technical indicators and studies to a list of securities and Analyst will produce numerical ratings to aid in the trading process.
Personal Analyst offers three unique chart templates: equiview, compare, and general market (Pro contains the general market template as well). The equiview template displays two years of price data, which is useful for displaying seasonal tendencies in the price activity of a stock. The compare template allows you to display up to four separate securities for easy comparison. Lastly, the general market template displays an advance/decline line, up volume versus down volume, the TRIN, McClellan oscillator and summation index.
The Analyst programs also contain a master analysis report including a technical summary that shows how your securities performed for the day, candlestick pattern alerts, and results of Analysts ratings systems.
Pro Analyst and HotlineX are Trendsetters real-time software packages, offering data elements not found in Personal Analyst or Personal Hotline—tick data, trade volume and size, time and sales, streaming news headlines, and a personalized ticker tape. With both programs, users can create bar, line, candlestick, and point & figure charts in timeframes ranging from one minute to monthly that are updated dynamically as trades occur. The software also allows you to work off-line for end-of-day analysis. Market Pulse reports in Pro Analyst and HotlineX can display over 75 pages of statistical indicators pertaining to all major exchanges, including most actives, new highs and new lows, index statistics, currency and futures markets, and more.
The next product on the Trendsetter ladder is Personal Hotline. The program builds upon the features found in Pro Analyst to offer high-end features geared toward active traders and investors, which are also found in HotlineX. The personal trade tracking function summarizes your open positions on a daily basis and analyzes your trading results. The expert trading model makes buy, sell, and stop-loss recommendations; tracks theoretical performance; and allows users to view past trading results such as winning trades versus losing trades, average gain or loss per trade, net profit (after commissions), and maximum drawdown. The day trader system offers daily recommendations for commodities and stocks based on a system used by commodity traders. Personal system alerts allow users to build and test their own technical trading systems and receive alerts when trading opportunities appear. In addition, users can apply multiple technical studies to a list of securities, and the program will generate numerical ratings to help identify trading opportunities. Two features missing from Personal Hotline, a product billed as a program for traders, are support for intraday or real-time dataa necessity for active tradersand the ability to optimize trading systems.
HotlineX is the latest sibling in the Trendsetter family. With this program, Trendsetter has overcome one of the shortcomings of Personal Hotline—lack of real-time data—by merging the features of Personal Hotline with the real-time capabilities of Pro Analyst to provide the most advanced program of the four offered by Trendsetter.
Trendsetter offers programs that cater to most investors and traders. One feature we would like to see added to Personal Hotline and HotlineX is system optimization. However, beginning and intermediate technicians using a Mac should find a Trendsetter product that meets their needs.
Insider TA Standard & Professional
Insider TA Standard and Pro from Stock Blocks, Inc. are unique applications compared to the others highlighted here. Whereas most technical analysis programs available today offer users a range of analysis techniques, InsiderTA is more of a niche product. To elaborate, the bulk of the analysis performed by the program deals with volume—more specifically, equivolume. This type of charting places stock price and volume (the program only handles stocks and only uses end-of-day data) on equal footing in the form of two-dimensional boxes: The vertical height of a box is the price range for the period, while the horizontal x-axis is a sequence of periods where the box grows wider as volume increases and narrower as volume decreases. The programs also offer candlestick, candlevolume, and point & figure charts.
For volume analysis, Insider TA offers four tools—consolidation mapping, box analyzer (BA), volume analyzer (VA), and VA rank. The box analyzer is based on ease of movement principles and determines the trend in price by analyzing box shapes and their relation to price movement. The program identifies trends, issues buy and sell signals that indicate where a reverse in price may be taking place, and plots the signals on the chart being analyzed. The program also provides a summary of how the trades would have performed had you traded on the buy and sell tags.
Insider TAs volume analyzer is a derivation of on-balance volume (OBV) and attempts to measure the demand for a stock. Volume analyzer is plotted as a line that rises when there is more buying interest in the stock than selling interest, and vice versa. Building on the volume analyzer function, the VA rank function measures the relationship between a stocks price and its volume analyzer level. Extremes in the VA rank line indicate potential entry and exit points.
Beyond those features found in Insider TA Standard, the Pro version offers additional features, such as stop-loss and trailing stop signals that attempt to protect you in the event of an unexpected turn in the stocks price. Pro also offers direct data access compatibility with TeleChart, CSI, and QuotesPlus data compatibility (the standard version handles CSI and TeleChart indirectly by using file export utilities), as well as a file scan utility that allows you to scan portfolios of stocks to find those that meet your individual criteria. With TeleChart 2005 installed on the same system, Insider TA Pro detected the database and seamlessly imported this data into Insider TA Pro without any problem.
While Insider TA may not be able to serve as a stand-alone analysis tool, its unique analysis capabilities, used in tandem with other technical analysis tools, can provide insight into a stocks future movements. The free demo that is available for download at the Stock Blocks Web site allows you to see whether the suite of tools fits into your analysis framework.
Investor/RT Standard,Professional, Pro Backtester, & Pro Complete
The programmers at Linn Software are arguably some of the most prolific in the industry. Since our comparison in 2004, their technical analysis program has gone through eight new versions and over 40 intermediate revisions. The fruit of their labors is one of the most complete and versatile technical analysis and trading programs available today. An added bonus is that Investor/RT is one of the few technical analysis programs that is offered for both the Mac and Windows operating systems. It offers practically everything an active technical trader would need—end-of-day as well as intraday analysis, several different chart types, custom indicator and trading systems creation, system optimization, order placement, and portfolio management functions.
All versions offer an array of chart types—including line, bar, candlestick, and point & figure—along with a library of over 130 technical indicators. In addition, Investor/RT provides candlestick pattern recognition. Users may select from any of the over 30 predefined patterns and the program will mark each patterns occurrence on the display—even on an intraday basis.
For any trader, it is important to track open positions; however, portfolio management and tracking capabilities in a trading and analysis package are considered added conveniences. Investor/RT can track long or short positions and gains and losses on stocks, mutual funds, futures, and equity/index options. The system also tracks transactions such as cash, dividends, commissions, and interest in order to calculate the annualized rate of return for each open position. However, one missing feature is year-end tax reporting.
The proliferation of updates with Investor/RT has also led to multiple versions of the programfour in all. Both real-time and end-of-day versions of the software—Investor/RT Pro and Standard, respectively—support a wide variety of data feeds through the Internet or satellite. In fact, users can choose from nine different data services. A relatively new, and cost-efficient, feature is the ability to download historical quotes for free from Yahoo! Finance. The program has also integrated the Yahoo! Finance Stock Screener into its interface. At this point, screening criteria are limited to price range and average volume, with additional criteria promised for the future. The resulting tickers from a screen can then be imported into Investor/RT. Lastly, Investor/RT can download 19 different key statistics/fundamental values from Yahoo! Finance as well as sector and industry names.
Investor/RT Professional also offers LinnSofts Real Time Language (RTL) capabilities. With the RTL, users can create custom indicators, trading systems, and scans. Using the scan function, users have the ability to identify trading signals being generated. Scans can be based on technical indicators, fundamental data, and current or historical prices and can be run using tick or minute data as well as daily, weekly, and monthly data. Once a scan is completed, the results are presented in a quote page that can then be sorted on a number of data elements.
For users of the Professional software, two additional trading systemrelated versions can be purchased, for an extra $10 to $40 per month, depending on whether you are using end-of-day, intraday, or real-time data. The trading system development & backtesting feature that comes with Investor/RT Pro Backtester adds the tools users need to develop and backtest trading systems using RTL. This version allows users to organize trading signals into a set of trading rules and then backtest these rules over any desired time period. To analyze the results of backtesting, this version also offers detailed reports.
Investor/RT Pro Complete rounds out the Linn offerings by adding system optimization to its list of features. The trading system optimization feature allows users to backtest various combinations for the variables used in the trading system to find the optimal values and periodicity. Once a trading system has been developed, backtested, and optimized, trading system deployment allows for the plotting of trading systems—in real-time or on an end-of-day basison a chart. With the trading system deployment module, users can set up signal actions that can communicate trading orders when trading system rules are triggered. These orders can then be sent to simulated trading portfolios within Investor/RT or to real brokerage services.
Overall, Investor/RT has features and functionality that rival any of the high-end packages discussed here. Mac users will also appreciate having such a robust system at their disposal. A wide variety of both end-of-day and real-time data sources is an attractive feature for those wishing to shop around for a data provider. The ability to download historical data from Yahoo! Finance is another welcome addition. For those who may experience problems, technical support is very responsive as well.
MetaStock, from Equis International (a Reuters company), has long stood at the top of the technical analysis software industry. Each year the readers of Technical Analysis of Stocks & Commodities magazine vote the software among the best. With a potent offering of technical indicators, charting capabilities, and system development and optimization tools, coupled with unrivaled ease-of-use, MetaStock has established itself as one of the most complete end-of-day programs of its kind.
MetaStock offers an extensive collection of charting styles, with nine chart types to choose from—line, bar, candlestick, equivolume, point & figure, Kagi, Renko, three-line break, and candlevolume. Chart windows are object-oriented, so any modifications to a chart or indicator on a chart can be done by right-clicking on the appropriate area. The programs SmartCharts feature automatically saves your charts, along with the underlying specifications, so you do not have to recreate it the next time you open it. Users can also create chart templates that allow you to apply the same set of indicators and studies to different securities. You can even create a custom default template that is always used when a new chart is opened.
MetaStock comes with over 200 technical indicators and line studies. To help gauge the direction of the overall market, MetaStock offers over 90 broad market indicatorsmonetary indicators as well as momentum indicators for both the NYSE and NASDAQ.
If you choose to create your own indicators, the programs indicators builder offers over 200 mathematical, statistical, and technical operators from which to choose. MetaStocks programming language, while it does take some getting used to, is similar to the syntax used in writing formulas in Microsoft Excel.
The Explorer function in MetaStock allows you to find, compare, filter, rank, search, and list multiple indicator values for multiple securities, including stocks and futures. Users can view a list of securities that are generating buy or sell signals or that have broken through some predefined barrier dealing with price or indicator. MetaStock ships with a set of predefined scans, and you can create and save custom scans with the same programming language used to create custom indicators.
A useful educational tool for novices and experts alike is MetaStocks Expert Advisors. These advisorsthere are now more than 60help users interpret technical analysis signals. Expert alerts provide indications of when current market conditions meet your criteria. There are also Expert highlights that color-code individual prices or significant chart patterns. You can use these expert systems to receive text, audio, or video alerts when certain conditions are met. Using the indicator builder, you can also create your own market advisors.
MetaStock now comes with 50 trading systems and allows you to create your own trading systems, all of which can be backtested and optimized with the enhanced system tester. This feature enables users to run one system on a single security, many systems on a single security, one system on many securities, or multiple systems against multiple securities. It also offers features such as the ability to change and edit variables in testing—entry and exit points, commissions and slippage—to help create a more realistic picture of the trading scenarios results.
One typical drawback of such an advanced product is the difficulty of learning to use it. While MetaStock is one of the more user-friendly applications out there, Equis still provides its customers with a wealth of resources to get the most out of its programseverything from hard-copy manuals to on-line classes and user groups.
Users can purchase MetaStock and a subscription to the Reuters DataLink data service for $59 a month or they can purchase the MetaStock software along with The Downloader (Equis data downloading software) for $499 and go with a third-party data vendor such as Dial/Data, Reuters, Telescan or eSignal. The Downloader automatically collects price updates, tests data for accuracy, checks for data errors, adjusts for stock splits, and reinvests mutual fund dividends.
MetaStock offers everything a seasoned trader needs—custom indicators, trading system development, backtesting, optimization, and scanning capabilities. However, it also offers ease-of-use and extensive educational resources to fortify any neophyte. Equis highly rated, and free, technical support is another reason to give MetaStock a close look.
OmniTrader, from Nirvana Systems, is unique compared to the other advanced software packages highlighted here. Instead of offering trading systems to complement a suite of analytic tools, Omni Trader is an automated trading system. Much like a black box program, the software automates the analysis process and provides trading signals based on the analytic tools. However, the program is more of a grey box, as you are shown the basis of the signals and can specify system parameters.
OmniTrader ships with 61 pre-installed trading systems. For many years, those wishing to create their own systems had to go without, as the program did not support this functionality. The new OmniTrader System Development Kit (SDK) allows users to write their own trading systems, indicators, and exits. However, the skill set required to make use of SDK greatly exceeds that needed for any of the other packages discussed here. The SDK is completely implemented in Visual Basic 6.0, so unless you are a programmer trained in Visual Basic and own the Visual Basic 6.0 software you will probably need to be satisfied with the pre-built trading systems or look at a different program.
There are three versions of the program—stocks, futures, and real-time. The stocks edition handles stocks, mutual funds, and options on an end-of-day basis; the futures edition adds the ability to track futures, also on an end-of-day basis; and the real-time version combines the functionality of both the stocks and futures editions with real-time analysis capabilities. OmniTrader supports end-of-day data feeds from Nirvanas OmniData, IDCs eSignal, Quote.coms QCharts, Telescan, and DTN Interquote and supports intraday data feeds provided by eSignal, DTN Interquote, and QCharts.
The cornerstone of OmniTraders analysis is the Personality of Markets Theory, which is based on the assumption that trading systems fail when markets change personality. The program attempts to overcome this possibility by applying a proprietary adaptive reasoning model that tests all of the trading models in the program against a given security to select the best-performing systems for each security. So instead of testing a signal system with a particular security, the programs tests 61, a unique feature among the services discussed here. The signals generated by the best-performing systems are displayed in a vote line. OmniTrader then votes on the signals generated by the top systems to arrive at consensus buy and sell signals. This process is ongoing, so the optimization results are dynamic, giving users a fresh basis on which to trade.
The program itself is nearly fully automated, offering a variety of useful and timesaving features. At the heart of this automation is the To Do List. Here you can instruct the program to download historical and current price data and perform analysis for each symbol on the Focus List (the list of securities being analyzed by OmniTrader). With the To Do List, you can also manage the strategies in the program as well as edit the parameters of each individual strategy. Lastly, you can use the To Do List to specify the test periods applied to all the strategies in the profile. Once you have run the tasks on the To Do List, new trading strategy signals are displayed in the Focus List along with a statistical analysis of the efficacy of the strategy.
To allow users time to familiarize themselves with the software and the trading process without risking real money, OmniTrader has a game mode. Here, the software randomly selects a symbol and displays the chart and all associated trendlines, candlestick patterns, and trading systems the program has found most useful in analyzing that security, along with the corresponding vote line and consensus signals. To avoid any bias on your part, however, the identity of the security is not revealed. Once the game has started, you can place trades and track the value of your account over time.
The other training module in Omni- Trader is the lab mode, which is similar to the game mode but allows you to trade a specific portfolio of securities. The futures edition automates the analysis process for futures contracts. It will roll over to the next contract automatically, build continuous contracts, and provide alerts to first notice days. Lastly, you receive seasonality graphs that show the seasonal tendencies of contracts.
The real-time version is compatible with intraday delayed and real-time data services. It also offers all the features and functionality of both the stocks and futures editions, in real time.
OmniTrader is a good choice for would-be and intermediate traders looking to learn about technical analysis and trading. However, it is disappointing to see the skill and cost required to create custom indicators and trading systems. Those not needing these capabilities may be intrigued by the robust selection of trading systems and unique buy and sell signals.
ProphetStation, another newcomer to this comparison, offers affordable intraday delayed or real-time charting and analysis capabilities as well as portfolio tracking for stocks, futures, and options. The service also offers one of the most comprehensive databases on equities, futures, and options.
The service offers a respectable collection of technical indicators—over 70—along with eight charting styles, including bar, candlestick, and line charts. For those using real-time data, there are also real-time tick charts. Historical charts can display as much data as is available for a given security along with a variety of timeframes. Unfortunately, you cannot specify an exact date range to display data. In addition, intraday charts are limited to only one day of data. Users can manually draw trendlines on both historical and intraday charts. Another useful feature of the program is the ability to E-mail charts you create.
To track your holdings, users can set up multiple portfolios and watch lists. If you enter position and purchase information, you are able to track the daily change in value for individual securities as well as the entire portfolio. A portfolio window contains columns of data that you can specify (53 in all) and use to sort the securities in the portfolio. From within the portfolio you have the ability to access a wide variety of data and information on a selected security. Zacks Investment Research is the primary provider of this information, including company reports, earnings estimates, industry comparisons, analyst recommendations, insider transactions, and financial statement data.
ProphetStation is one of the few services in our comparison that offers integrated trading. You can configure ProphetStation to use with five different brokers—Ameritrade & IZone, Ameritrade Canada Trading, Ameritrade/Datek, Freetrade, and optionsXpress.
The program also offers portfolio alerts to let you know when circumstances that you defined have occurred. Alerts can be based on price action, news events, or a data column value within the portfolio. Alerts can be color-coded in the portfolio, audio alerts, pop-up windows, or E-mail.
Data for the program comes exclusively from Prophet Financial, which is recognized for having quality data, so there is little worry of receiving dirty or erroneous data.
ProphetStation is designed for individual investors looking for affordable, real-time charting that is easy to learn and navigate and who dont need trading system development, backtesting, or optimization.
ProTA & ProTA Gold
ProTA and ProTA Gold from BeeSoft are two of the more complete technical analysis programs available for the Mac. They can handle a wide variety of markets—equities, mutual funds, indexes, futures, options, bonds, and commodities on an end-of-day basis.
ProTA offers an array of charts to satisfy the needs of most technicians—line, bar, point & figure, and candlestick. In addition, it offers over 45 fully customizable technical indicators and line studies. Both programs also offer candlestick pattern recognition for over 20 common patterns.
The programs portfolio tracking module allows users to enter buy and sell trades and it will display, analyze, and rank trades in a number of ways. It also generates statistics such as cost basis, return on investment, profit/loss, and more. Users can track technical information such as moving average values and volume activity, as well as post trade entry and exit points, and track overall performance.
ProTA Gold has all of the same features as ProTA, as well as advanced features found in high-end technical analysis packages with much higher prices. If you are not satisfied with the existing library of technical indicators, ProTA Gold gives you the added flexibility of creating an unlimited number of custom indicators. Custom indicators may then be plotted on charts, ranked in a portfolio sheet, used as scan criteria in the database scanner, and used to generate buy/sell signals in custom trading models. The BeeSoft Web site also has a library of user-created indicators that can be downloaded and installed.
For those interested in creating trading systems, ProTA Gold offers that functionality as well. You can specify trading rules for entering and exiting both long and short trades. To simulate real-world accounting, ProTA Gold allows you to specify commissions, slippage, and idle fund interest rate. The program will then plot buy and sell points on the chart of the security being analyzed, generate trade lists and summary statistics, and optimize the system.
ProTA Gold will also scan for securities that meet user-defined technical criteria. You can specify one or several technical or performance-based values and the program scans the entire database or a portfolio of securities for those that fit the parameters. Securities that pass the screen are then placed in a portfolio sheet where you can view or rank the results.
Both programs allow for direct data downloading from Dial/Data. In addition, with the Universal Text Importer that is included with both packages, users can import data in a number of formats, including MetaStock, Excel, and ASCII. The only data issues to keep in mind are that neither program automatically handles stock splits, mutual fund distributions, or futures contract rollovers, and they do not support intraday or real-time data. For programs with such an impressive collection of features, it is disappointing to see that they do not go beyond end-of-day data.
Developer Jeffery Bizon has been at work on versions of both programs for the Mac OS X. They are currently in private beta testing and he hopes to have production versions ready by the summer.
Mac users looking for technical analysis programs will not be disappointed. Both programs offer extraordinary value given their features and functionality.
SMARTrader & SMARTrader RT
SMARTrader from Stratagem Software has a long and distinguished lineage, tracing its roots back to one of the first commercially available technical analysis packagesCompuTrac. However, age may be catching up with it, as the program has not seen any changes since our last comparison two years ago.
SMARTrader is a platform for charting, technical analysis, trading system development, testing, and optimization. The program is built around specsheets (short for specification sheets), which are divided between a definition window and a spreadsheet. The definition window allows you to specify the information you wish to calculate—data files, indicators, and entry and exit rules. The spreadsheet is where the actual raw data, studies, formulas, and profit results are calculated and displayed. SMARTrader offers a variety of chart types, including line, bar, candlestick, and point & figure. This roundabout method of creating charts and plotting indicators makes SMARTrader more cumbersome than some of the other packages highlighted here. However, what is lost in sexiness and ease-of-use is made up for in speed of execution and value.
For system development and testing, SMARTrader provides a formula wizard that does not require much mathematical knowledge. If you want, however, you can still write your own formulas using algebraic operators and mathematical expressions. The software can also optimize the variables in a trading system and generate a list of the results of each optimization run. The listing includes information such as net profit, maximum drawdown, maximum gain, and number of trades.
SMARTrader allows users to automate tasks using SmartSearch and SmartView. With SmartSearch, the program searches the database to find securities that meet user-defined criteria. Securities matching the criteria are placed on a hot list and SMARTrader will draw price charts for these securities with any indicators you specify. The SmartView function allows you to draw charts for any security or your entire database and then view them. The browse mode cycles through the charts automatically using a time interval of your choosing.
Other features of SMARTrader include a portfolio manager, database manager, and screening capabilities. SMARTrader RT supports real-time data from Quote.com.
The developers of SpiffyCharts have transformed what was a good entry-level technical analysis program into one offering features of the industry heavyweightscustom indicators, trading system testing, development, and optimization. Yet, they have managed to keep the cost the samefree! In addition, it is the only program highlighted here that is compatible with three different operating systems—Windows, Mac, and Linux. Those interested in SpiffyCharts can download the software and register it for free (www.spiffycharts.com).
The software is a little lacking in the chart types it supports, as users can only plot bar and line charts. The developers hope to provide candlestick charting in future versions. Currently, there are 48 technical indicators and line studies to choose from, a very respectable number. Creating charts and applying indicators is not as intuitive as in other programs and takes some getting use to. In order to open a chart, you must specify the model or indicator you wish to plot on the chart. This creates a worksheet that consists of both the chart and a table with the underlying price and volume data and the calculations behind the indicator. From here, you can apply additional indicators.
For a free program, the ability to create custom indicators is an impressive offering. User Functions allow you to create your own indicators and functions and are text files containing sets of commands, which are used to generate new columns of data in the worksheets. The language used to create User Functions isnt necessarily more complex than what is used with some of the other programs here, but the lack of a wizard to aid in the process does make things more difficult and time-consuming.
While the ability to create custom indicators is impressive, being able to create and optimize trading systems is even more so—a new addition to SpiffyCharts since our last comparison. Trading models allow the user to establish their trading rules—buy and sell commands—as well as set the variables for the model along with the ranges used during optimization. Once the backtesting and optimization process is complete, SpiffyCharts generates reports that contain a variety of statistics regarding the performance of your trading system.
The program supports three fee-based data services but does not provide any data importing, so if you wish to make use of up-to-date data with SpiffyCharts, there will be a cost involved—that of the data subscription. Supporting only fee-based data providers is one way SpiffyCharts developers keep it free—the data vendors pay them a percentage of the monthly data fee. According to their Web site, a Spiffy-Charts Pro is in the works that will offer access to free data sources as well as a license fee.
SpiffyCharts has come a very long way over the last two years. The addition of custom indicators and trading system testing and optimization now make the program a serious contender in the industry. While the program is not as pretty or sexy as most of the others in this comparison, keep in mind that you get what you pay for. For the cost of data only, you have decent charting capabilities, a respectable indicator library, the ability to create your own indicators or studies, and now system testing and optimization.
StockShare is the last new entrant for this years comparison. From StockShare Publishing, this Windows- and Java-based application is a solid option in the realm of technical analysis and charting software.
StockShareV2 is designed using Tabs and Chart Pages, which at first are a little confusing. Tabs are separate windows or pages displaying charts, indicators, or combinations thereof. A Chart Page is one area of a tab, with each page containing separate price, volume, or indicator information. A three-page tab, for example, would have three different chartsperhaps a price chart on one, volume data on another, and an MACD on the third.
For charting purposes, StockShare offers both open-high-low-close bar charts and candlestick charts. There is also a collection of 32 technical indicators and line studies. The program does not allow you to create you own indicators. In order to modify chart properties and add selected analysis overlays, all you need to do is right-click on the chart to display a pop-up window. One element you cannot fully control, however, is the data range of charts. You can specify ranges from one year up to 20, but cannot dictate a specific time period.
The Groups tab in StockShareV2 is a handy feature that allows you to organize stocks into groups based on sector or industry, market capitalization, etc. This is useful for those wishing to look at a large number of stocks.
A unique feature of StockShare is the risk/reward calculator. Here, users can enter portfolio size and risk percentage along with entry, stop, and target price. Based on this data, the calculator determines the risk/reward ratio, the amount of capital at risk, the potential reward if the target price is reached, and the number of shares to trade. This serves as a useful money management and risk control mechanism.
StockShare does not offer backtesting in the same manner as some of the other programs mentioned here. Instead, the programs backtesting feature is more of a game mode where you select where to stop the data and, based on the analytical tools at your disposal, decide what actions need to be taken. Users can then step ahead one day at a time to see whether their decisions yielded the expected results.
StockShareV2 accesses free delayed data feeds that are available over the Internet—such as at Yahoo! Finance, MSN, and Brite Futures. These feeds give you access to over 130,000 stocks, indexes, mutual funds, and commodities from over 30 countries. The program also can make use of MetaStock data and has an ASCII text importer.
StockShare is a good choice for beginning and intermediate technicians. Its collection of indicators, ability to collect data from free data sources, and reasonable price make it an attractive candidate.
TeleChart has established itself as one of the top technical analysis and charting packages on the market since its release in 1988. Over the years, it has evolved from being a simple program for the beginning technician to one of the most complete technical analysis and charting applications available for beginner and intermediate technicians. Its combination of solid charting and technical analysis capabilities, ease-of-use, and unique features has made it one of the most popular end-of-day products on the market today.
TeleChart is a truly free program. You can download the program from the Worden Web site (www.worden.com), although be aware that it is roughly 600M. You can also opt to receive the program through the mail, also for free. At no cost, you also get 20-plus years of historical data, free tutorial video set, free live on-line video training course, and free chart analysis lesson archive.
Although Worden markets its software for free and offers a substantial free historical database, to use the program with current data you must subscribe to a data service. Worden is also a data provider and TeleChart 2005 can only use Worden data feeds. Worden data has long been highly acclaimed and is compatible with numerous technical analysis programs. A Gold subscription, which offers end-of-day data, is $29.99 per month. A Platinum subscription for $99.99 per month gives you have access to unlimited real-time data and expanded features for TeleChart 2005.
The TeleChart 2005 database currently covers over 6,800 exchange-traded stocks (it does not track bulletin board or pink-sheet stocks), over 200 exchange-traded funds (ETFs), and nearly 200 market indexes. Stocks are also divided into 239 Media General industry groups. TeleChart 2005 offers a dozen or so indicators, including some proprietary indicators that are exclusive to the program. If you wish to go beyond the provided indicators, you can program your own. Unfortunately, there is no wizard to walk you through the process and the programs help system provides no useful information on the topic. Supposedly, the training CDs that come with the program show you how, so be sure to keep them as a reference.
One of the most useful features of the software is the Worden Notes, based upon the trading ideas of the Worden brothersDon and Peter. Users can view the Wordens charts to use and to learn from their indicator choices and analysis ideas. The notes are delivered throughout the trading day, as well as at the end of the day.
With TeleChart 2005s Easyscan feature, you are able to locate symbols meeting custom search criteria. Simultaneously, you can scan for long-term technical and fundamental conditions, as well as intraday conditions. The software comes with several predefined scans and users can save custom scans. Users will find predefined lists of index and industry components.
Beyond getting real-time data and charting capabilities, Platinum subscribers also get a number of features that Gold subscribers do not. Charts can be displayed in a variety of timeframestick; one-, five-, 10-, 15-, and 30-minute intervals; hourly; daily; weekly; monthly; quarterly; and yearly. Platinum service also offers access to over 40 real-time news and commentary outlets. One feature that is lacking is access to Level II quotes.
One of the more interesting Platinum features is that the software allows users to interact with each other. Platinum subscribers can join more than 100 public and private chat rooms or create their own. Here, users can discuss their own trading strategies, gain insight from others, and exchange links, files, and charts with other members. Platinum subscribers can also access on-line events such as Live Audio Chart Shows from expert traders, including Peter Worden, live QQQQ-trading chat, and weekend club meetings.
TeleChart 2005 is an excellent program for those just starting out in technical analysis. The programs ease-of-use will not intimidate new users and its collection of educational content, including the Worden Notes, provides real-world trading insight. More advanced users will also appreciate these issues, as well as TeleCharts powerful scanning capabilities.
Wayne A. Thorp, CFA, is editor of Computerized Investing and AAIIs financial analyst.