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Trading Systems - What You Need To Know Before You Buy One

Aug 17, 2007
When traders contemplate purchasing a new trading system for stock market trading, they typically don't consider the cost of ownership. But, there are many things that new traders should consider when purchasing a new piece of software like the cost of maintaining the software and the cost of the data the program will need to function. In this article, I will mention some of the additional cost that traders should consider before making the decision to purchase a new trading system for stock market trading.

The cost of owning a trading system or charting package for trading the stock market can be very high. Several factors come into play when looking at the overall cost like the type of market you trade and whether or not you intend to use end of day or real-time data. A stock market trader who is looking to trade stocks real-time versus end of day could find their data costing as much as 200% more than the typical end of day data service.

The format of the data can make a difference too. A program that requires a specific data format can be more expensive to own. Two common formats of data for trading software are Metastock and ASCII. There are pros and cons of using both. But since these are among the industry standards for data format, and makes data vendors more plentiful and there is more competition. Obviously, it is this competition the keys the cost down.

When the trader considers a real-time service they can end up paying much more. However, the cost may be justified depending on how frequent the trader trades and the type of market he trades. A trader who trades in markets such as futures can experience a good deal of volatility and therefore they may want to have a real-time service where they can see the fluctuations of volatility that occur during the day in the charts of their trading.

An alternative to a real-time service is a delayed service. A service that delivers delayed quotes can cut the cost of the data by as much as 80% from the real-time counterpart. This can make a huge difference for traders to or just starting out and may want to use the money to trade rather than pay for real-time data.

The cost of owning a trading system can be pretty steep for beginners and professionals alike regardless of whether or not you are interested in stock market trading or some other market. When considering the purchase of a new system, traders should take the cost of their data feed into account. This sets their foot firmly on the path of treating trading less like a hobby and more like a business.
About the Author
Sam Perdue has been actively trading the markets for over 13 years. He has written a computer program that helps traders analyze the stock, Forex, commodities and options markets using Fibonacci ratios, Elliott Wave, option pricing and nonlinear programming algorithms. For more information, please see our stock market trading software.
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