There are a number of trading systems available online. Any trader who decided to start using an online trading system faces a question of searching, evaluating and selecting.
The online search is not a complicated task when we can see a lot of classified directories in addition to the search engines. All a trader has to do at this stage is to narrow the search to a specific description of the trading system.
The most important stage of the research is evaluating the online trading system. No matter what you are looking for, online options trading system, online futures trading system, stocks or indexes trading system, you have to find out if you are comfortable with trusting your money into the system you found.
Below, you will find some of the question that are logical to ask in the online trading system selection:
1. What kinds of signals does trading system generate?
Traders should know how to use the system. Is it easy to use or it requires some studding time. Are the signals explicit (buy/sell), somewhat explicit (60% up and 40% down for example) or a trader has to generate signals based on the system rules;
2. Does an online trading system require using any additional charting or any other software?
You need to know how much money and time you have to spend in order to use the system;
3. Does the offered online trading system allow you to auto-trade signals with leading online brokers?
This question is significant, even if you are not going to auto-trade. If the signals generated by the system are not auto-tradable you should be aware of the reasons. Is it because the technical difficulties (brokers do not support signals from the charts), or is it because signals are not explicit (60% up and 40% down for example) and are not clear for a broker, or is it because there are no online brokers who would trust this system...
4. What is the basis behind the system? How does the online trading system generate signals?
Some online trading systems use "black box" explanation and some completely reveal the mechanics behind signals generation. You should feel comfortable trading "black box" trading system as well as you should be ok with technical analysis in case one is revealed.
5. How are traders notified about signal changes?
You should know how quickly you will be able to react to a signal generated by the online trading system. You should know if you will be able to receive signals via cell phone, or you should monitor the computer all the time.
6. At what time are signals issued?
In case of a full-time job it would be difficult to use signals generated during the trading hours especially in case when the selected online trading system cannot be auto-traded.
7. Are signals designed for market orders or for limit orders?
Some online trading systems generate signals to be executed at market prices. With such systems, as a rule the trading system will enter and close a position at a price that differs from the prices available to those traders who decided to follow the signals. It happens simply because a trader needs some time to execute signals and even if a trader opens/closes position within a minute after a signal was generated the entry/exit price could differ significantly.
8. Does the online trading system use stop-losses?
If an online trading system does not use stop-losses you should be comfortable with this fact.
9. What is the system's performance?
A trader should be able to review an online trading system's trade history. If one is not available or if a history is hard to find or it represented in a way that makes it hard to evaluate objectively ask WHY;
10. Are the online trading systems monitored by an independent third party?
If a service is not being monitored, the logical question is to ask WHY. Traders should know whether they can trust the result represented for an options trading system. In some cases a system cannot be monitored simply because the generated signals are not explicit.
You should feel confident about the online trading system you use and you may have many other questions. Whatever trading system you chose, it should never conflict with your personal risk tolerance and trading style.