Stocking Your Trading Technology Toolbox

How much technology do you need to be a successful at-home trader? It's really a trick question, because each of us has different goals when it comes to the financial markets. These goals ultimately filter into our trading plans, dictating the hardware and software needed to gather useful data during the market day.

Trading preparation is all about information. So your technology should get you everything you need to know, but not overload your brain with extraneous details. In other words, your attention span is a limited resource that should focus exclusively on ideas and issues that make money. Information overload reduces your ability to manage the critical data that yields trading profits.

Some folks boast that they've mastered the market with a battered laptop hooked up to a dismal dial-up connection. In this minimalist scenario, the trader-savant does a little analysis, enters a few market orders, places stops and walks away for the day. Making one's livelihood with such little effort sounds fantastic, but it's pure fantasy for most people who are considering that path. No one is printing money; you'll need to work for every penny you make in the markets. Good technology makes that job a lot easier.

At the other extreme sits the trader who spends a fortune setting up a system that would rival the back room at Goldman Sachs (GS - commentary - Cramer's Take). These folks fantasize about a linear relationship between their absurd expense levels and eventual market profits. This digital overkill may provide the cosmetic benefits of trading, but it never trickles down to the bottom line.

So what's the right amount of horsepower for your trading technology? At a minimum you'll need a good quote service, charting program and order entry interface. If you make more than two or three trades a week, also consider a real-time or condensed news service. Then buy a backup system in case your workstation goes down just when you need it to get out of a bad situation or get into a good one.

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Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. At the time of publication, Farley did not have any positions in any of the stocks mentioned in this article, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback and invites you to send it to [e-mail]. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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