If you want to be a short term trader, you must have a good charting package if you want to be successful. Short term movement in any type of asset relies heavily on technical indicators, and this means you need to have the charts that allow you to see the technical signals and something that can interpret them, too.
What to Look For
When you are selecting a charting package to use, there are a few simple things that you need to look for. You want something that will update in real time, for starters. This is especially helpful for short term traders since it allows you to watch the asset’s minute changes and visualize momentum in a different way. Most packages that update have a feature that allow you to choose how often they update, and many will only update once a minute at the fastest. This is fine for most traders, even day traders. You may run into some issues if you are looking at the faster binary options trades, such as the 30 and 60 second options, but these tools should be rarely used by most traders and you shouldn’t go out of your way to get a faster charting package unless absolutely necessary–this is especially the case if you are going to be charged more, as you will see in the following paragraph.
Next, look at price. If you are a Forex trader, you can get one of the best packages out there for absolutely free. MetaTrader 4 is free to download, and it has many great user friendly features that will enhance your trading. If you are trading stocks or indices, you will likely need to pay to have a real time charting package, but the price is always pretty small, and well worth it because of the huge impact it will have upon your success with the markets. Some may require a monthly subscription fee. As long as it’s not going to offset your trading capital, then this is worth it because of the cost of having such beneficial information.
Ease of use is also important. Some packages will allow you to trade right from the chart, setting buy and sell points right from your charting package. It helps speed things up and consolidates your time. This is a powerful feature, but it is not available with every charting package. Again, MT4 allows this, as do a few of the other major Forex focused charting packages, but in some other forms of trading–such as binary options–this will be almost impossible to find. There are some stock brokers that will let you do this right from their sites or on a mobile device, but not all do, and many only allow it in a limited fashion. You may stil need to download a separate package in order to get the info you need when you need it.
How to Use a Charting Package
Many professionals recommend a three tiered approach to using charts. If you trade at the one hour level (trades are open on an average of one hour), then you should be looking at that timeframe, the one below it, and the one above it. You will find that charts have all sorts of graphs and lines you can have superimposed upon them, but you should limit this to just a couple indicators so you are not overloading yourself with too much info. Do this for all three timeframes that you’re charting so you can get a complete picture. If the charts match up and all point to the same conclusion, your decision on what to do should be very easy.
The reason why you shouldn’t use too many indicators is that many serve the same purpose. For example, using five different lagging indicators will not help you. It will just waste your time and make the decision making too difficult. Instead, find two or three things that work for you–perhaps a volume tracker, one strength indicator, and one lagging indicator–and use that info to frame your trade execution. It helps simplify the process a lot once you decide upon a combination that works for your trading style.