Stock trading was once a game only stock market professionals on Wall Street could play. The masses could only access markets through a broker, and they took the long-term approach to building wealth.
That’s all changed. Technological innovation has opened the door to online trading in nearly every financial market. Swing, momentum, and day traders alike make a living out of using various trading tools to exploit the volatility of stocks for quick profits, and the trend continues to grow in popularity.
There are several tools you can use to become more successful as you trade stocks. Some are must-haves and some are optional tools that have the potential to greatly expand your profitability.
Active traders know that if you blindly throw money into the market, chances are you’re going to lose money in the end. Instead, they use a wide range of tools to deploy proven strategies and improve their chances of generating profits.
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1. Trading Platform
You can’t effectively trade online without a trading platform. Although they all are somewhat similar, each platform is unique, so it’s important that you choose your platform wisely.
The best trading platforms for active traders provide a wide range of technical analysis tools, charting capabilities, and in some cases, backtesting, paper-trading accounts, and other tools for developing a solid strategy. More on some of these later.
One of the most robust platforms is TradingView. It comes with backtesting software, trading simulators, and a wide range of other tools for perfecting your strategy, analyzing the market, and improving your overall trading performance. The only drawback is that it only works with a select few online brokers because it was designed as a charting platform rather than a trading platform.
Brokerages also commonly offer state-of-the-art trading platforms for their customers. The thinkorswim trading platform has made TD Ameritrade a popular choice among day traders. Similarly, Interactive Brokers became a popular choice by offering unique order types and technical indicators with their platform.
2. Trading App
The stock market doesn’t shut down when you’re on the go. It’s important that you have access to the market at all times. That’s where mobile apps come in.
Just about everything happens on the go these days, and trading doesn’t have to be any different. Most of the best trading platforms come with a mobile app that’s just as intuitive.
Never get caught holding the bag because you’re not at your computer. Always be ready to trade on the go.
3. Stock Screeners
There are thousands of publicly traded companies in the United States and tens of thousands around the world, so finding the perfect trading opportunity can be like finding a needle in a haystack without the right tools.
Stock screeners are some of the best tools for finding the types of opportunities you’re looking for.
Stock screeners are pieces of trading software that search the market for specific parameters you set. They often yield matches in a matter of seconds, although the most robust stock screeners comb through significant amounts of data and can take a couple of minutes to produce results.
Nonetheless, if you tried to comb through the market for opportunities, analyzing them on a one-by-one basis, chances are you’d never have time to make a trade. Stock screeners make this possible with a few clicks.
4. Charting Software
Most quality trading platforms come with robust charting software, but there’s no shame in adding extra tools to the box. The best charting software offers as much real-time data as you can fit on the screen while making the data easy to read.
The best charting tools offer a long line of technical indicators and drawing and analysis tools. Some, like the charts at TradingView, even offer candlestick pattern recognition, so spotting entries and exits is a breeze.
5. Backtesting Software
Any trading strategy you come across or develop may seem like the best thing since sliced bread. You may be sure it’s going to work, but experienced traders know you should always test your strategy before deploying it in real life.
The first step to testing a trading strategy is to run it through backtesting software. Backtesting is the process of analyzing your strategy using historical market data to see how it would have performed in the past.
Don’t worry, you don’t have to go day by day, tick by tick, doing the math on your own. There are countless backtesting software providers online. Some of our favorite options include:
- Trade Ideas. Trade Ideas is a premium trading tool that earned its position as our overall best pick for backtesting software when we analyzed the different services available.
- TradingView. If you’re looking for a free backtester, TradingView is the way to go.
- Interactive Brokers. Interactive Brokers has a fundamental backtester that puts a unique spin on a process that usually only values technical data.
- MetaStock. MetaStock’s backtester is coupled with a forecaster so you can see how your strategy would have done in the past and how likely it is to be successful in the future.
6. Trading Simulator
Trading simulators, also commonly called demo or paper trading accounts, aren’t just for beginners. They’re another tool expert traders use to develop and perfect new trading strategies.
Trading simulators mimic the real-life trading environment but using virtual money. No, not Bitcoin; completely valueless money in a simulated account.
You can use the simulated currency to test your strategy without risking any of your hard-earned capital. If all goes well in the trading simulation, and all went well in the backtests, you can enter the markets with confidence using your real money, knowing your strategy has a high probability of success.
7. Commission-Free Brokerage Account
When the internet made the stock market available to everyone, there was a caveat. You had to pay for access. Just about every original online broker charged a commission every time you made a trade — and it made sense. That was the way of the traditional stockbroker.
That doesn’t work too well for active traders. After all, if you’re a scalper who makes 10 to 20 or more trades per day, the $4.95-per-trade fees eat your profitability. That’s why you need access to free trading through a commission-free broker.
There are several brokers that offer zero commissions on domestic stocks and exchange-traded funds (EFTs), including:
- Charles Schwab. Charles Schwab earned our best overall pick among commission-free brokers.
- TD Ameritrade. TD Ameritrade has climbed through the ranks to be one of the most popular brokers among active traders thanks to its thinkorswim trading platform.
- Robinhood. Robinhood simplifies the trading process, making it our best pick for beginners.
- WeBull. WeBull offers a simple platform with several advanced trading tools.
- Fidelity. Fidelity is a favorite broker for no-cost ETFs, but they’re also a compelling choice for active traders.
8. Idea Generator
One of the hardest parts of trading is finding quality trading opportunities. That’s why most professional traders use multiple tools to generate ideas. Some of the best idea generation tools include:
- Social Media. Supply and demand dictate price movement in the market. Professional traders scour social media to find out what the masses are talking about and why. Then they use that information to exploit the volatility in those assets for a profit.
- Signal Services. There are several trading signal services online. They generally use trading algorithms to spot quality opportunities and notify subscribers. Each message comes with a stock, entry, exit, stop-loss, and usually a description of what makes the trade a compelling opportunity.
- News Feeds. The news moves the market. Earnings reports, mergers and acquisitions, new product announcements, and management changes all have the potential to send a stock screaming for the top or crashing to the bottom. That’s why the best traders pay attention to news feeds when they look for the best trading opportunities.
9. Trading Journal
Trading is just like anything else. The more you do it, the more experience you gain, and the better you get at it. However, the learning curve between beginner and expert doesn’t have to be so steep. One of the best ways to flatten the learning curve is by using a trading journal.
You can manually journal your trades, but you don’t have to. There are several trading journal providers online that can automate the process. Some of our favorites include:
- Edgewonk. Edgewonk earned its position as our best overall trading journal. The low-cost platform offers detailed trade analytics, quality backtesting tools, and even emotional analytics to help you keep your emotions in check as you trade.
- TradeBench. If you’re looking for a free option, TradeBench is the way to go. There are no paid subscription options. The company makes all its money through advertising.
- Trademetria. The challenge feature of the Trademetria trading journal is both useful and enjoyable. When you find areas to improve, you can create challenges to help you focus on those areas of your trading strategy.
No matter what trading journal you use, logging all your trades and reading your journal once per week will help you avoid mistakes and improve your trading decision-making process.
10. Educational Tools
The most successful traders are those who took the opportunity to educate themselves on the process. Most active traders lose money, so it’s important that you understand the complexities of the market, what makes an effective strategy effective, and how to manage risk before getting started.
Don’t worry, you don’t need a doctorate degree to be successful. However, it doesn’t hurt to take an online trading course or two. Some of the best trading courses include:
- Trade Ideas. Trade Ideas has an excellent trading course that teaches you everything from the basics to complex topics, and it comes with tools including an artificial intelligence that can help you become more profitable.
- TopStep. TopStep doesn’t just teach you how to trade, it puts its money where its mouth is. TopStep uses its own money to fund your trading account and lets you hold onto the first $5,000 in profits. After that, you must agree to an 80/20 profit share, but that’s fine because your money isn’t at risk.
- Warrior Trading. We were also impressed by Warrior Trading’s in-depth educational series, webinars, and trading sessions.
- ThomasKralow.com. Finally, ThomasKralow.com lets you learn at your own pace with a more traditional education format.
You’ll never see a roofer get on a roof without a toolbelt. If you want to be a successful trader, you need to have the tools for the job.
If you have all the tools mentioned above, you have everything you need to develop a solid trading strategy, find trade opportunities, research and analyze trades, and ultimately turn them into profits.