Trading software : the pitfalls
Trading software is designed to make your trading experience easier, more exciting and less complicated. A good software package can help you make the most of your knowledge of the markets and maximize your profits. At the end of the day however, trading software is still a tool rather than a complete solution- a fact that many online traders tend to forget.
Regardless of how advanced software may be, there are still certain actions that a software program cannot perform and certain precautions it cannot take. After all, if software on its own could make profits, then anyone who could afford a package would have a six figure bank balance. Listed below are a few common misconceptions about trading software and tips on ways to avoid the pitfalls of online trading.
Trading software cannot cut your losses for you
Trading software can supply you with all the information you need to make a decision about when to sell specific shares. What it cannot do is pull the plug for you when share prices fall. The only person who can do that is you. Sitting tight in the hopes that share prices will once again rise is one of the biggest mistakes that online traders make and one of the main reasons that significant amounts of money are needlessly lost. The bottom line is that if your shares are steadily falling, sell them before they hit rock bottom, which is the only place they are going to end up if you hold onto them.
Trading software cannot keep all the records that you need
Your trading history is the main tool to brush up on your skills and improve your judgment. Most trading software systems incorporate some kind of history files that contain records of deals that have been made within a certain period. Contrary to popular belief however, these history files are by no means sufficient. Knowing exactly how well or how badly you are doing and how much money is moving in and out of your account is essential for making correct decisions as well as for tax purposes. It is advisable to keep a comprehensive spreadsheet and print out this information regularly so you have access to it in the event that something goes wrong in the electronic world.
Trading software does not guarantee security or an instant exit from volatile markets
Regardless of how advanced a trading platform may be it still does not have the ability to close positions by itself. If you fail to take the necessary steps to protect yourself there is nothing that you or your software program can do to prevent you from suffering future losses should an electronic blackout occur. If you are looking to trade from home, investing in a backup modem and an uninterruptible power supply (UPS) is essential. A UPS will not only protect your computer from power surges but also give you enough time to close any positions that are open should a blackout occur.
Trading software is not a guessing tool
Trading software is designed to give you the information that you need to make informed decisions and beneficial deals. No trading software should be treated as a magic ball that can be used to tell the future of the markets. Many traders use the data supplied by trading software packages to rapidly buy and sell stock in the hopes that they will make a small yet substantial profit off each deal. In the long run this is nothing more than a recipe for disaster that will eventually lead to significant losses.
Trading software does not equal security
Trading software packages are designed to be informative and give you the data that you need to trade effectively. They are not designed to protect you or your money from losses at the hands of Internet fraudsters. Choosing passwords that are difficult to crack, investigating encryption and firewall options, placing restrictions on your trading account and keeping track of your money is your responsibility - not that of a software manufacturer. Trading software manufacturers do not specialize in security. You, however, should!