Free stock software downloads and resources

As time goes on, companies claiming to sell trading advice and provide tools for buying stocks are becoming more and more sophisticated in an effort to con increasingly wary investors.

Stock market day trading was in its heyday around the same time as the dot-com bubble. People with very little understanding of what they were up against thought they could outwit Wall Street by having fast connections to exchanges like NASDAQ. They were charged hefty commissions for each trade they made, at least in comparison with big firms on Wall Street, and a lot of financial companies providing hookups and software for day traders became quite rich.

Day Traders would be provided "tools" for buying stocks and would sit in front of a monitor and watch their screen for a signal that it was time to do a stock trade. They'd do many trades a day. Sometimes winning and sometimes loosing. This gives a similar rush to gambling.

The problem was that day traders didn't last that long. Within a year, most had gambled away their money and had to quit. Sadly it hasn't stopped less experienced people from falling into the same trap.

There are a huge number of investors out there who may trade on the timescale of days and weeks, not quite at the same frenetic pace as day traders. They still get conned into buying software tools and advice from snake oil salesmen that have become very rich at their expense.

There are lots of different aspects to why most of what these companies say is a bunch of malarkey. Lets go through how this can be understood by examining some of the common "tools for buying stocks".

Pay for "Secret" Picks

Some combination of a computer system and human intuition is often used to pick and buy hot stocks, that will suddenly do very well at a particular time. You get this information, type it into your trading account, and voilà , you've made money. Thank you sleazy fly-by-night charlatan for making me a millionaire.

The resources at Mr. Charlatan's disposal pale in comparison with the likes of Goldman Sachs. If there was money in this trade, Goldman would've sucked all the profit out of it long before Mr. Charlatan had any inkling to its potential.

So the only way this could be true is if something illegal was being attempted. Like if someone had insider information. That is confidential information that something was going to happen in a company that'd affect its stock price. For example if Joe works at a company making computer chips and sees that there is a serious flaw in its design, he could tell his friends to sell (or go short) in the company's stock. That'd be illegal. If Mr. Charlatan had actually heard this information, he would be risking spending time in federal prison for disseminating it to his customers. If he was indeed criminally inclined, he'd be better off financially and less likely to get caught, if he simply sold short with his ill-gotten gains rather than selling you "tools" for buying stocks.

The other thing that he could be doing is a "pump and dump" scheme to manipulate the stock price. He sends out loads of spam, pumping company X, to try to get some poor idiots to buy stock in the company. He, and/or his subscribers purchase it first and then when it's climbed due to the artificial demand that he's created, they all sell, making a profit. Needless to say, this is also an incredibly stinky thing to do and would land you prison time as well. Obviously you don't want to get involved in this sort of rubbish.

Barring seriously illegal behavior on the part of Mr. Charlatan, you're left with him having no ability to to predict the price of stocks and having no valuable stock buying tools. So you're paying Mr. Charlatan money because you feel sorry for him? You shouldn't. There are much worthier causes.

Trade like the pros

Want to learn the secrets of how to trade like the pros? Well you've come to the right place. The secret is to not make risky investments and stay away from get quick rich schemes. And don't fall for any scammy tools for buying stocks.

But how is it that so many people on Wall Street are so filthy rich? Surely they've got to be doing something more than what you say? Yes, they are, but a lot of the reason that they're rich is that they are acting as middle-men, trading other peoples' money.

For example, if a mutual fund wants to buy 100,000 shares of Intel stock, they go to a market maker on Wall Street, who will execute the trade, but charge them. The way they do that is interesting and has to do with the "spread" of the stock. But it's irrelevant for the point we're making. They're not taking any risky positions, just buying stock for a customer for which they get paid well. They take a low risk for doing this. They just buy the stock and sell it. They don't have to hold onto the stock for long at all.

Then there are lots of professional stock traders run computer based trading that rely on incredible speed. Often there are very short time-scale inefficiencies in the market, that will disappear after a mere second. This is a long time for a computer. The computer is programmed to notice a large variety of complicated ways to arbitrage these situations and make a little money in the process. Not only do you need the special software, but the guys that win are the ones with the fastest hookups to the trading networks. The networks are not the internet. If you think you'll be able to compete by trading electronically through the internet, you are mistaken. The internet must connect up to NASDAQ, Island, or a large number of other systems. The lag time in doing this through the internet, means these profitable situations are long gone before your signal gets transmitted to them. Even if you did invest in getting the necessary licenses and money to make the connections, you'd still be competing with a zillion others doing the same kind of thing. And they have other advantages as well, such as very low clearing costs. Every time they do a trade it'll cost them a lot less than it will you to buy the stock, meaning they can find more profitable stock trading situations and make more money.

And then there are people that trade and invest over longer timescales, like most mutual funds. Look how they do. About half do worse than the
S&P 500. So want to buy stocks like pro? As we've said, getting your dog to make the trades will do about the same as the stock pros.

The upshot is that if you want to trade like a pro, don't listen to some sales guy claiming that if you pay him, he'll get you up to speed with his special "tools" for buying stocks. You'll end up giving him money and in the long term, are likely to regret it.

Buying and selling strategies for the "sophisticated"

By which we mean the pseudo-sophisticated. People that know just enough about math, statistics, and probability to really screw things up.

It's like the story of what happens to a lot of people when they begin to learn Karate. They start thinking that they're invulnerable and often end up limping and with black-eyes. It takes more than a few lessons Grasshopper to become enlightened. The same holds true for stock investing.

If you read what these sites claim, they'll run through a lot of nonsense on how you can limit your risk by having various price points for buying and selling. For example, if the price of a stock falls below some target you've set, you must sell. Makes sense huh? If you didn't do this and the price kept on dropping, you could loose your shirt. So you've got to
be "disciplined" and cut your losses. All of this might seem sensible, but it's total garbage.

As we've seen, the stock market is almost completely unpredictable to everyone, that is random. If the stock falls, on the next tick, it will go up or down, with (almost) equal probability.

So when you think about stocks, think about the price coming up or down, based on the toss of a coin. That is actually less random than the stock market! If you're trying to limit your risk when tossing a coin for money, then the easiest way is not to play. Short of that, it doesn't matter what strategy you employ.

Let me explain. Suppose that you bought a stock with a price per share of $10. Then, a minute later it's worth only $9.9. A minute or so later, it goes down to $9.8, and then $9.7. You listen to Mr. Charlatan who says that when you reach $9.6 you've got to sell. It starts going up again but then sadly, retreats down to $9.6. You then sell. Good thing huh? You only
lost $0.4 per share. You really limited your risk doing that. Nope. Each time the stock changes price, its like a much more random version of tossing a coin. So lets say in the future, like later that afternoon you decided to buy a stock again, then it's graph of ups and downs would be statistically as likely as if you had not pulled out of the stock at $9.6.

In other words, if you're not lowering your volatility by pulling out, except by the trivial fact that you're in the market for less time. But statistically, it doesn't make a stitch of difference whether you're in the market for one large chunk of time, or you go in and out of the market, based on some kooky trading strategy.

This is because the market is completely unpredictable and it going down, does not bias it to going down further at later times. You're trading one string of random tosses for another string of random tosses.

You will not reduce your risk of loss by any of Mr. Charlatan's techniques, unless he also suggests you diversifying into a larger portfolio. But you don't have to pay him money to realize that one. That is well known among all savvy investors, professional or otherwise.

How exactly you choose a portfolio of stocks is another matter. Don't trust Mr. Charlatan and his "tools" for buying stocks to do that for you.