The stock market is a data-intensive landscape. Everything is represented via numbers, and every number is constantly in motion. Which means, software comes into play. Especially technical analysis software.

The analysis of those numbers comprise the sum total of all stock research, even when the intangibles of a company don’t seem to be numerical in nature, like the quality of their products. In the end, even those soft variables translate to numbers by way of forecasts of data such as revenue, profits and the need for capitalization.

This research comes in two flavors: fundamental and technical.

Fundamental analysis is where those soft issues are found, amidst a sea of hard numerical data. Fundamental analysis is the study of a company’s health, the trending of their financial strength as represented by profits, margins, expenses, trending, and net capitalization, all of it in context to forecasts.

The result is a picture of how the company stands to fare, both in context to the market, and in comparison to its competition, going forward. The results of this analysis bear directly on investor supply and demand, which is the determinant of stock price levels and movement.

But fundamental analysis comprises only half of the research game.

The other half is called technical analysis.

Technical analysis looks at the historical trading ranges of a stock, putting it in context to the market in general. Baring outside influences (which usually come from the fundamental side, i.e., profit forecasts are slashed), a stock trades within a given range, establishing upper and lower boundaries.

All things being even, when investors sell off a stock the price drops accordingly. There comes a level – again, barring news that supports a downward trend – at which investors will regard the lower price as a buying opportunity, thus bringing fresh buy-side demand back into the market. This, in turn, stabilizes and then strengthens the stock, propelling it back up into the trading range.

The reverse also true.

When the price reaches a certain level, investors will take their profits by selling, thus establishing the upper end of a trading range. This puts sell-side pressure on the stock, sending it back down into it’s trading range.

When a stock violates these upper and lower limits, it’s known as a “breakout” stock, the price then being less subject to prediction based on a lack of data. This is new territory, and there’s nothing to say that investors will stop buying at a given level. Or in reverse, stop selling it off. Sooner or later the same factors that determine the former upper and lower trading limits kick in – investors smell a buying or selling opportunity and begin to buy or sell into the prevailing momentum.

None of this has much at all to do with the company whose name is on the stock certificate.

There are software programs that track this price performance data, and in great detail. They analyze demand and supply volumes, including backlogged bids and offers, juxtaposed against established trading ranges based on historical data for that stock. When the limits are approached, the software flags this stock as a buy or sell opportunity, allowing the human operator to determine if a breakout is likely based on any relevant news.

These programs are available either as a service bought via subscription, or you can buy them yourself, though they are quite expensive. They are a valuable tool for short term investors and traders, while longer term investors pay much less attention to trading ranges.

For them fundamental analysis is much more relevant, because today’s trading ranges have little relevance to the stock years down the road.

Unless they are planning on buying in or selling soon. In that case, everybody loves a bargain, and technical analysis software is a tool that can help you find one.

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The financial markets are a number-driven arena. The health and status of a company and its stock is represented by numbers, which are constantly in motion.

Software programs track it all, and it stock analysis software upon which many investors rely.

The Two Flavors of Stock Research

There are two realms of analsysis, and thus, two types of stock analysis software. Both are basically screening devices, designed to identify stocks based on carefully established criteria.

Fundamental analysis looks a company’s financial health, including profits, margins, expenses, trending, and net capitalization, all of it in context to forecasts. The results help drive investor demand, which in turn is the primary influence on stock prices levels.

Technical analysis analyzes historical trading ranges in context to the market. Baring relevant news, a stock price remains within a range, one with upper and lower limits that history proves to be valid.

If investors sell a stock the price drops. Sooner or later investors will see the stock as a buy opportunity, which stabilizes the stock, sending it back into the trading range. The same is true, only in reverse, on the selling side.

The role of stock analysis software.

When a stock violates its trading limits on either side, it’s called a “breakout” stock. Performance is then harder to predict because of a lack of data. Literally, this is new territory, and no ranges yet exist.

At some point the very factors that created the old trading limits come to bear, as investors sense a buying or selling opportunity and begin to buy or sell against the current trend, thus stopping the breakout while establishing a new range.

Very little of this has much at all to do with the company whose name is on the stock certificate. The exception is when the breakout represents the markets response to some news, such as a forecast being exceeded or disappointing results, or even a change in management.

The are programs that track this price performance data in great detail is called stock analysis software.

These programs analyze buying and selling volumes, watching for stock that approach established trading ranges. There are also programs that compare the fundamental data between companies, such as price-earning ratio, both for current and projected profit levels.

Now even the little guy can compete.

Such programs come an online service, or you can purchase them yourself. They are a valuable tool for short term investors and traders, while longer term investors pay much less attention to trading ranges.

All of this used to be the exclusive province of a stockbroker. But with today’s online services and the power of the software that drives it, even the smallest investor can perform all kinds of analysis from their home office, all with the help of stock analysis software.

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Never have three words been so well-advised, especially when you put the first in italics: learn to day trade. Because if you dive in without having done your homework, somebody out there will eat your account balance for lunch.

And if that sounds like day trading is an us-versus-them proposition, a competition, that’s precisely what it is. Because for every purchase you make there’s a seller, and for every sale you make there’s a buyer. Not only do those guys believe they know more than you do, chances are they have done their homework, too.

The New Era of Day Trading

The hey-day of day trading in the late 1990s is long gone. Pretty much everyone lost their hat, not so much to smarter investors than to greed, ignorance and the context of crashing market. Knowing when you get out, even knowing when to go short, is essential in day trading, and with five years of easy money warping the collective minds of day traders who had little or no experience, the greed factor was at an all-time high.

Not only did investors take a bath, but brokerage houses with extended margin lines took a hit, too. In order to prevent a recurrence of this fiasco, the federal suits did two things to slow and monitor the day trading arena.

New Quotes, New Spreads

First, they changed stock quotes for percentages to absolutely dollars and cents. What once was quoted at 7 3/8ths is now quoted at 7.38, or 7.37. And that’s the point here – there are now one-cent increments to deal with. Spreads used to be a minimum of 1/16th, or 6.25 cents, enough for a trader leveraging a little volume to actually make money on a wash trade (buy at the bid, sell at the ask).

But now, with a one cent spread, that’s virtually impossible, and not a remotely attractive proposition given the risk. The effect was to slow the day traders down, and it worked. Now a stock needs to actually move in either direction and by a factor a five to 10 cents or more, before it’ll get a day trader’s attention.

Under Penalty of Law

The other thing that has changed is the regulatory landscape. Day traders who trade frequently – at least four trades in a single day over a five day period – are called “pattern day traders,” and are subject to tougher margin limits and trading thresholds.

No longer can someone sit in their kitchen on a laptop and fritter away the family fortune. Because now, thanks to these new rules, you must maintain a $25,000 equity balance in a margin account, for which you must first qualify with the broker. And if you don’t, your account is frozen until the balance is restored, in addition to a five day waiting period.

Learning to day trade is easy. There are online classes, books and even live workshops everywhere. It’s advisable to actually practice day trading using dummy accounts until one understands the pace, mechanics and vocabulary.

But rest assured, when there’s real money on the line, your judgment will be challenged. Because if there’s one thing that hasn’t changed since the late 90s, it’s the role of fear, ignorance and greed in the outcome of a trader’s day.

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The contextual meaning of the phrase day trading tips has two dimensions. One makes a lot of sense. The other is crap shoot.

On one hand, day trading tips include advice about the process-oriented methodology and tools involved in the actual practice of day trading online. Such advice could include everything from… don’t trade with a hangover or when you are not emotionally focused… to, make sure your computer RAM is sufficient to handle the data flow requirements of the software you buy to support your online real-time data feed and the need for upload speed for entering trades.

The other is an entire marketplace full of products – software, news feeds, online mentors, newsletters and bulletins – that actually tap you on the shoulder with “buy-now” and “sell this now” recommendations. These sources claim to use utilized models and real time market monitoring systems that trigger buy and sell points and define trading ranges within those “hot” trading moments.

Where the Two Contexts Overlap

For the latter to work, you need to have all the best efforts of the first realm – hardcore technical and process-oriented advice – in place. For example, to respond to the real-time tips provided by your system or mentoring source, you need to be able to respond quickly, clearly, efficiently, be error-free, and able to sense when you’ve hesitated too long.

Hard to do with a hangover.

No Buy/Sell Ideas Here

So if you’ve arrived here via a search engine hoping to find the next hot options trade or commodities strategy, keep looking, they’re all over the internet. But not here. Because such recommendations have a lifespan of mere seconds, and the focus of active markets can shift from day to day. If you do see an online posting recommending a buy or sell trade on a specific security, either research it immediately and, better, ignore it. Because it’s probably yesterday’s new.

The biggest tip you will ever hear is this: knowledge is power in the day trading game. Use the available systems and tools to increase your market visibility and ability to respond, which is the power required to succeed.

But even then, you’ll need more than a $4000 piece of software and a hard drive the size of a garbage truck. Just like an athlete must be steeped in the subtleties of a sport and then emerge themselves in the game, sometimes for years, before they begin to develop a sense about it, so too much day traders seek to hone their sense of where the market will go and which securities have already made their move.

Because, again, just as with sports, there’s someone across from you seeking your defeat. In this case it’s another day trader, who represents the market as a whole, and it’s you against them.

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