Tag: Movements

Using Free Stock Trading Software For Analyzing Stock Price Movements

In this article we will discuss how you can use free stock market software to perform technical analysis and identify direction of stock price. Why are we discussing “free” software? The reason is many people believe that you can only do good analysis and make stock price predictions using very sophisticated and expensive software. That is not true.

 

Some of the freely available software is actually free of cost. Now, our intention here is not to discuss the merits and demerits of this freely available software. That is for anyone who uses the software to judge. But we can tell you that it would very much depend on what analysis you want to do. Tools available at msn, yahoo and google are fairly robust and provide great abilities to perform technical analysis.

 

Let us identify some of the basic analysis that one can do using this free software:

 

·        First of all, one can plot the stock price chart movement for a number of time intervals. At the lowest level you have the ‘intra-day” chart which is basically an hourly chart movement for a single trading day (normally today’s). Then you can typically go all the way to 10 years and, in some cases, for the life of the stock. Why is this valuable? It is very valuable because it gives us a time perspective on the direction. For example, the stock price of a company may look flat or even down over a 3-month chart. But over a 3-year period the stock price may be on a roll (trending higher). So, the time frame factor allows a user to analyze based on that users time perspective (read as trading timeframe).

·        Secondly, the software allows one to plot the price movement against another item (or several items). For example, sometime back, we analyzed a chart of the three major banks – JP Morgan Chase, CitiGroup and Bank of America – within the same chart over the same period to analyze which of these Banking sector companies stock price moved the best under similar market conditions. Of course, all these banks had different financial numbers. But it was still a good analysis point to understand the strength of each bank vis-à-vis each other. (The comparison can be seen through a link within the signature box of this article). One can also plot a chart comparing how a stock price has compared against an index for the same time frame. This can be powerful as it tells us how a stock price is performing relative to the general market.

·        Thirdly, most free software will allow us to identify the support and resistance levels of a stock price. These are the highs and lows of the stock price over any given period. For example, one can review the stock price over a 3-month period and identify the highs as the resistance points and the lows as the support points. This allows traders to understand what levels typically a stock price has to go beyond to break out. So, we had looked at Microsoft (ticker symbol: MSFT) as an example in another article and noted that, for the most part, the stock price has been trading in the range of -30 over the last 10 years. That is a very long timeframe and typically not used by traders. However, the technical analysis would say, that is the support point of MSFT and is the resistance point. If the stock breaks any of these numbers, then it is likely to keep going in that direction further.

 

There are a lot of other analysis points that we can do using free stock market software. These will be covered in another future article under trading indicators. For now, we hope we have busted the myth that free stock trading software is no good.