Technical Analysis & Charting Programs

Technical analysis involves studying the market activity of a given security or index—namely, its historical prices and volume. Unlike fundamental analysts, pure technicians are not concerned with “fair value.” The tools of technical analysis are charts and technical indicators, which help to identify patterns that suggest future price movements.

Today there are dozens of programs on the market devoted to technical analysis and charting. Given all the choices you have, it is vital that you identify the type(s) of analysis you wish to perform as well as the securities and markets you wish to track and then purchase an appropriate program. It is also a good idea to familiarize yourself with the features and functionalities of a variety of packages to find the one that suits your needs.

This comparison of technical analysis and charting software covers programs catering to “mainstream” technical analysis, and, thus, our more typical reader. We have also divided this comparison into two parts. What you are reading here covers the key features to consider when shopping for technical analysis and charting software as well as an in-depth look at the top editor’s picks in the area. For a more comprehensive look at the offerings available in this category, you can visit the Computerized Investing Web site for expanded coverage. All of the programs covered both here and in our expanded on-line article, at a minimum, handle stocks, offer charting capabilities, and have a library of technical indicators. You can use these programs for end-of-day analysis, while several also handle intraday analysis on either a real-time or delayed basis.

The comparison grid examines the key features you should expect to find with a full-featured charting and technical analysis platform. When available, we also offer a link to the company’s respective Web sites for a listing of the technical indicators each program offers.

While our comments here are based on the latest versions of each program, it is always a good idea to verify features with the company before buying.

Reviews of our top-rated programs and the ratings table is presented.

What to Consider

Data

With technical analysis, the bulk of data used in the analysis process is price and volume data. When looking at technical analysis software, you will find that some programs are tied to an “in-house” data service while others are compatible with one or more third-party data vendor. No matter the data source, be sure to budget for the potential additional cost of the data and don’t be surprised if, over time, data costs eclipse the initial purchase price of the program.

The following are some of the typical data issues to consider when evaluating a technical analysis and charting program as well as seeking out a compatible data vendor.

End-of-Day Versus Intraday

Price and volume data, the key inputs of technical analysis, can be delivered to the end-user on either an end-of-day EOD or intraday basis. End-of-day data summarizes activity during the course of the trading day. In contrast, intraday data provides periodic updates throughout the trading day on either a real-time or a delayed basis. A premium is usually paid for this more timely data.

End-of-day analysis typically involves analyzing price and volume data over many years, perhaps decades or more. For this reason, most end-of-day technical analysis programs offer some type of historical price and volume database. If it’s not offered by the program, you will need to seek out a compatible third-party source of historical data.

Ideally, even intraday programs offer a database to plot historical charts. Furthermore, a sufficient historical database is necessary for programs offering the functionality of system development and testing, which we will discuss later.

Supported Data Vendors

Technical analysis programs that use data from third-party providers require you to choose a data provider as well as a technical analysis and charting program.

The programs highlighted here vary in their support of data vendors. Some programs, such as TeleChart from Worden Brothers, rely on a sole data source. These “self-contained” packages do not allow users to shop around for a data provider.

Others give users a wide variety of compatible data vendors from which to choose. Investor/RT, for example, currently supports 12 different data providers. When there is a broader selection of data vendors, you have a better chance of finding one that meets your exact data needs—and budget. The comparison grid indicates which data vendors each program supports.

Some programs can also automatically collect price and volume data en masse from free sources, such as Yahoo! Finance and MSN Money. The implications for the end user are difficult to ignore. Whereas in the past it may have cost hundreds of dollars to establish a reasonable historical database from a fee-based data provider, you can now do this for free. However, Investor/RT is the only Editor’s Choice program here that allows you to download historical end-of-day data from free data sources.

Data Exporting

Other types of programs can make use of historical price and volume data, including portfolio tracking and management software. This is where data exporting can save you time. If you hope to use your data in other programs, be sure to check the export formats of a technical analysis program and see whether you can import data into other programs you use.

Split, Dividend & Distribution Adjustments

Since the accuracy of charting and technical analysis is all predicated on the accuracy of the underlying price and volume data, it is important that the data you are using correctly reflect certain events or, at a minimum, allow you to easily adjust the data. Events include stock splits as well as dividend and distribution payments.

Programs that automatically adjust for stock splits will back-adjust any historical data you already have when a stock split occurs.

Some data providers and charting services also adjust historical stock and mutual fund data downward to reflect dividends and fund distributions. As a result, if you were to compare long-term charts for a dividend-paying stock or a mutual fund with large periodic distributions, the services that adjust downward will show chart levels going back several years that are lower than charts from the services that do not downward-adjust historical data. Such adjustments allow the user to more accurately track price performance over time.

All three of our top picks will automatically adjust data for splits, dividends, and distributions.

Charting

Chart analysis is a cornerstone of technical analysis. In fact, many technicians rely solely on what they see on a chart when attempting to predict future price movements.

Chart Types

There are several popular chart types used by technicians, and the programs here differ in the types of charts they offer.

The most common chart types are line and bar charts, and all of the programs in this comparison offer these two chart types. Line charts plot a single price point—usually the closing price—over time. In contrast, bar charts may show up to four data points for a given period—the open, high, low, and closing OHLC price for a day, week, month, etc.

Some other common charts you may run across include candlestick, equivolume, and point & figure. A proper discussion of these charts is beyond the scope of this article. However, you can find articles dealing with charting in the on-line Computerized Investing archive (www.computerizedinvesting.com).

Chart Templates

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.

Indicators

A technical indicator is the mathematical manipulation of price and/or volume data, which is then typically displayed on a chart. The number and type of indicators built into a program are important factors to consider when selecting a technical analysis program. However, the raw number of indicators should not be the sole consideration—more is not necessarily better. Instead, the emphasis needs to be on ensuring that the program includes the indicators important to your analysis. Do not automatically write off a program just because its indicator library appears to be less robust than other programs.

When available, the comparison grid has a link to the Web sites of the various software companies listing the technical indicators each program offers.

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. To make use of these, 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 creation process.

Filtering & Alerts

In generic terms, screening is the method of taking a large universe of securities and narrowing it down to a more manageable number with similar characteristics. Within the context of technical screening, you are isolating securities that exhibit certain technical properties, such as price 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.

Another useful feature is the ability to receive alerts when certain “technical” events take place. These events can include meeting a specific value for a technical indicator, a technical system generating a buy or sell signal, or even violating a trendline. These alerts can take the form of on-screen pop-up windows, E-mail alerts, or messages sent to your cell phone or other hand-held device.

Trading Systems

Many traders develop trading systems—sets of trading rules for when to buy, sell, short, or cover—based on technical indicators, and they use a technical analysis program to indicate automatically when these rules are triggered. The rules underlying a trading system can involve a single indicator or a collection of confirming indicators matched to specific market conditions.

Generally, you tend to find trading systems in the higher-end technical analysis packages. All of our top picks offer system trading; however, TeleChart’s requires its StockFinder module and with Investor/RT you must purchase a premium module at an additional monthly cost. You are also able to modify these systems to match your own trading patterns and the securities you track. For the most advanced traders, there may also be a need to develop your own technical trading systems. Again, our top picks allow you to build systems from scratch, although Investor/RT and MetaStock do so in a more straightforward and intuitive manner than TeleChart.

When developing a new trading system, it is useful to test it using historical price and volume data to get an idea as to how it may perform going forward. To backtest a system, users specify a time period in the past, and the test provides an indication of how the trading system would have performed over that period.

It is important to implement assumptions that mimic the “real world” as closely as possible when you backtest a trading system. 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.

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 basic 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. When it comes to system optimization, Investor/RT and MetaStock again deliver this functionality, while TeleChart does not.

When analyzing the overall effectiveness of a system, it is useful to have access to 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. The ability to rank and compare trading system performance is a valuable tool for finding out how different systems perform in different market conditions.

Program Help & Support

Technical analysis programs tend to be some of the more complicated software packages you will run across. Therefore, you want to make sure you have the resources to get to know the program.

The best way to learn a program is to roll up your sleeves and dive right in. However, the learning curves for these programs differ greatly. All three of our Editor’s Choice programs offer in-depth user resources to help you get the most out of your investment. Through their respective Web sites or on-line help systems, each offer multi-media tutorials or guides that help you navigate through the programs.

The days of receiving printed manuals the size of a small-town phonebook are long gone. Today, when you run into trouble using a software package, you can usually refer to a help system within the program. If the program’s help system isn’t as helpful as you would like it to be, ideally there will be human support available through E-mail or telephone. All of the programs in this comparison offer, at a minimum, free E-mail support.

Some software companies have even built on-line user “communities” where you can go and interact with fellow users. At these forums, you can exchange ideas relating to trading and gain insight on how to get the most from your technical analysis package. Users of these three Editor’s Choice programs will find discussion forums that will allow you to interact with other users to exchange ideas.

Top Technical Analysis & Charting Programs

Investor/RT 10.0

Investor/RT 10.0, from Linn Software, was released on November 16. The program is a unique among investment software in that it is compatible with both Windows and Mac OS. There are three versions of the program—Investor/RT (designed for real-time, intraday data), Investor/RT End-of-Day (designed for end-of-day data), and Investor/RT Market Profile. Within each of these versions are also two different editions—Standard and Professional. The Standard Edition offers charting, predefined technical indicators and drawing tools, and custom instruments. The Professional Edition offers added functionality through the Investor/RT user language called Real Time Language RTL. With RTL, users can perform custom scans, create custom indicators and trade signals, and build advanced indicators. The Market Profile product implements CME/CBOT-licensed Market Profile charting for futures trading. For more information on Market Profile charting, visit the Linn Software Web site at www.linnsoft.com/futures/tpo/index.htm. Lastly, you can also purchase Trading System Tools for any of the Professional Editions of Investor/RT, which allows you to develop, optimize, and implement technical trading systems either in real-time or on an end-of-day basis.

Investor/RT offers several popular chart types, including line, bar, candlestick, and point & figure—along with a library of over 110 technical indicators. In addition, it provides candlestick pattern recognition. Users may select from any of the over 40 predefined patterns, and the program will mark each pattern’s 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, the program does not offer year-end tax reporting.

Investor/RT supports 12 different data services providing data access via the Internet or satellite, including real-time futures data from Zen-Fire, Infinity Futures, and TransAct Futures. One excellent money-saving feature is Investor/RT’s support of free historical quotes and fundamental data from Yahoo! Finance. Within Investor/RT, you will also find Yahoo’s Stock Screener. With this screener, you can now choose from a variety of price, volume, and fundamental data points (13 in all). Once you run a screen, you have the option of importing the symbols of the passing companies into the Investor/RT database, at which point you can then use Yahoo! Finance to update historical data, fundamental data, and sector/industry classifications. You can also import ticker symbols from text documents.

Investor/RT Professional offers all of the functionality of Standard plus several features for more advanced technicians. Chief among these features is LinnSoft’s Real Time Language RTL capabilities. With RTL, users can create custom indicators, trading systems (using the Trading System Tools add-on), and scans. Using the scan function, users are able 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. Professional also supports additional indicators that are fully reliant on RTL.

The Trading System Tools add-on provides trading system development, testing, and optimization to Investor/RT. Users can 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. The trading system optimization feature allows users to backtest ranges of values for the variables used in the trading system to find the optimal values and periodicity. With the trading system deployment module, users can set up “signal actions” that 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. You can deploy trading systems as indicators on a chart with buy and sell signals. The Trading System Tools add-on costs $20 a month for Investor/RT End-of-Day users or $40 per month for Professional Edition users.

With version 10.0, Investor/RT offers direct-broker access for Rithmic, Zen-Fire and Interactive Brokers. This means you can now place orders within Investor/RT and the program will convey them directly to one of these brokerages. Furthermore, the program will automatically update your portfolio to account for the trades you make.

MetaStock 11 End-of-Day

MetaStock, from Equis International—a Thomson Reuters company—has been a leader in the technical analysis software arena for over a quarter of a century.

MetaStock goes beyond the standard chart offerings of most charting platforms to offer nine different charting styles—line, bar, candlestick, equivolume, point & figure, Kagi, Renko, three-line break, and candlevolume. Chart windows are object-oriented, so you can perform any modifications to a chart or indicator on a chart by right-clicking on the appropriate area. The program’s SmartCharts feature automatically saves your chart, along with the underlying specifications, so you do not have to recreate it the next time you open it—a valuable time-saving feature. You 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 you open a new chart.

MetaStock comes with over 350 technical indicators and line studies, 60 of which have been added to MetaStock 11. To help gauge the direction of the overall market, MetaStock offers over 90 “broad market indicators”—monetary indicators as well as momentum indicators for both the NYSE and NASDAQ. New in MetaStock 11 are 43 “adaptive indicators” with dynamic look-back functionality based on volatility, cycle, or a combination of both. This is in contrast to standard indicators, which use a fixed look-back period, such as a 50-day moving average.

If MetaStock’s extensive indicators library isn’t enough, you can also create your own indicators using the program’s indicator builder. You have over 200 mathematical, statistical, and technical operators from which to choose. MetaStock’s “programming language,” while requiring some getting used to, is similar to the syntax used in Microsoft Excel to write formulas.

The Explorer function in MetaStock allows you to find, compare, filter, rank, search, and list multiple indicator values for multiple securities, including stocks, currencies, options, 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 an indicator. MetaStock also 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.

One useful educational tool for novices and experts alike is Meta­Stock’s Expert Advisors. These advisors—there are more than 60—help you 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 ships 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. You can run one system on a single security, many systems on a single security, one system on many securities, or multiple systems against multiple securities. The program 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 scenario’s results.

Despite offering such a powerful program, the developers of Meta­Stock have taken great pains to make sure the program is not overwhelming. The software is very user-friendly and offers a comprehensive on-board help system. In addition, the Meta­Stock and Equis Web sites offer user forums, free Webinars and video tutorials, and real-time on-line support chat.

Users can purchase MetaStock End-of-Day and a subscription to the Reuters DataLink data service for $59 a month ($565/year), 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/Track Data. The Downloader automatically collects price updates, tests data for accuracy, checks for data errors, adjusts for stock splits, and reinvests mutual fund dividends. With the Downloader, you can also import TC2000 data for use with MetaStock.

Note that we were not able to install MetaStock on Windows Vista Ultimate or Windows 7 Ultimate. According to Equis support, they have yet to make the program fully compatible with those operating systems.

TeleChart 2007

TeleChart from Worden Brothers is our final top pick among technical analysis and charting software. Compared to MetaStock and Investor/RT, it is easy to write off TC2007 when looking at its features. However, 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 comes in end-of-day Gold and streaming real-time (Platinum) versions. Unlike MetaStock and Investor/RT, which support multiple data vendors or allow you to import data, TeleChart is only compatible with Worden data feeds. The Gold software and data package costs $30 per month and Platinum costs $90 a month. The database itself contains over 5,800 exchange-listed common stocks and nearly 850 exchange-traded funds ETFs. The program comes with dozens of predefined watchlists, including those for Hemscott industry groups and subgroups. Once you have selected a watchlist, you can have the program run a slideshow of the charts for the symbols in the watchlist. You can also create and save custom watchlists.

TeleChart offers the basic chart types—bar, candlestick, and line—along with 17 technical 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 as a subscriber to the Gold Suite and Platinum versions of TeleChart. Unfortunately, as user-friendly as the rest of the program is, creating custom indicators is a bit clumsy, especially when compared to Meta­Stock.

One of the most interesting and useful features of the software is the Worden Notes, based upon the trading ideas of the Worden brothers—Don 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’s Easyscan feature, you are able to locate symbols meeting custom search criteria. You can run scans against the entire Worden universe or against subsets—personal watchlists, industries, etc. 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.

For advanced stock screening, backtesting and charting, you can upgrade your Gold or Platinum subscriptions to Gold Suite or Platinum Suite for $40 a month or $100 a month, respectively. StockFinder offers an expanded library of over 120 technical indicators. Platinum Suite subscribers also have access to Morningstar historical company fundamentals going back 14 years and Zacks historical earnings estimates and analyst ratings. Using StockFinder’s RealCode, you can also create your own indicators. StockFinder’s BackScanner allows you to backtest any indicator-based trading rule to see how it would have performed in the past. However, BackScanner does not offer optimizing capabilities. Lastly, Gold Suite and Platinum Suite subscribers can connect to their TD Ameritrade, optionsXpress, or Interactive Brokers account. While the StockFinder is a powerful addition to TeleChart, I found it to be less than intuitive as a first-time user. More than likely you should be prepared to spend time reviewing the free Webinars and other user resources to fully understand the functionality offered by StockFinder.

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 timeframes—tick; 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.

An interesting Platinum feature 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 to discuss trading strategies, gain insight from others, and exchange links, files, and charts with other members.

As TeleChart’s capabilities have expanded, so too have the resources available to users to learn about them. There are hours of Webinars and video tutorials available on-line, with new events being offered all the time. There are also a variety of discussion forums where you can post questions regarding the program.

Other Offerings

While we have covered our favorite programs for technical analysis and charting, we have only scratched the surface of the offerings available. To learn about other programs in the area of technical analysis and charting, click here.