You might have seen traders on the news, in movies, or in their office with up to six monitors. The first question you are likely to ask is whether all those monitors are necessary. It turns out that there are many valid reasons–and one that might not actually be valid–why stock traders need multiple monitors.
Below are 8 reasons why stock traders use multiple monitors:
- To track order flow.
- To track relevant currencies.
- To track the price of raw materials.
- To keep up with news and current events.
- To track multiple stock markets.
- To track multiple time-frames.
- To track sentiment analysis.
- To show status on a trading floor.
Read on to learn the different data that stock traders need to track and see why they typically use multiple monitors. This article will also help you decide whether you need multiple monitors as a trader.
1. To Track Order Flow
Put simply, order flow is the rate at which traders place buy and sell orders on a stock. It shows the relationship between the demand for a stock and its supply.
To track order flow, a trader needs to see the orders that are placed on a stock as the price changes. This technique is beneficial for day traders. It helps them:
- Predict the direction of the market.
- Determine appropriate entry and exit points.
- Determine whether to place a market, stop, or limit order at a point.
It’s important to note that tracking order flow is only effective if used with other technical analysis strategies.
2. To Track Relevant Currencies
Many factors affect stock prices, and an effective trader keeps track of all of them.
When a stock is listed in multiple countries, its price is affected by the behavior of associated currency pairs. For example, if a company’s stock is traded in both the US and Canada, as a trader, you might want to track the CAD/USD currency pair in the forex market.
Having multiple monitors can help you track forex behavior more efficiently. Getting crucial data ten seconds earlier could make a significant difference in the stock market.
3. To Track the Price of Raw Materials
Various listed companies produce tangible goods that depend on a range of inputs. A change in the price of such raw materials could significantly affect the confidence that a market has in a stock, causing its price to change.
For example, in 2021, a global shortage in electronic chips caused a drop in automakers’ stock prices. At the same time, it caused an increase in stock prices of companies that enable semiconductor manufacturers to boost output.
As a stock trader, being among the first to learn about a potential change in raw material availability and price could help you set up a profitable position.
4. To Keep Up With News and Current Events
Macroeconomic activities sometimes have a significant effect on stock prices. Events outside the financial world often cause ripples in the stock market.
For this reason, traders like to keep up with the news to stay on top of current affairs. As a trader, knowing things the minute they happen can give you a significant competitive edge and help you be more profitable.
Additionally, keeping track of financial news is critical.
Some traders have a dedicated Bloomberg/Reuters terminal. Originally, this was because sites like Bloomberg and Telerate offered proprietary information through specialized terminals.
5. To Track Multiple Stock Markets
Some traders trade in various stock exchanges across countries. For such a trader, having multiple screens showing the trends of stocks in different exchanges is critical to success.
In trading, success largely depends on finding the perfect entry point. Passively tracking stocks on multiple screens can help. As soon as the trader notices movement on a screen, they turn their full attention there and determine whether there’s a favorable trade to be made.
It can be difficult to passively track multiple stocks if they are not within sight.
6. To Track Multiple Time Frames
Keeping track of multiple time frames is especially important for day traders. You need to have several points of view of a market at any point.
There’ll be the primary time frame that you use to track ongoing positions. This could be a two-hour time frame, showing stock movement in the last two hours.
You might need a smaller time frame to help you identify appropriate entry points for making short-term trades.
You could also benefit from a larger time frame to help track key support and resistance points and help you make other analyses.
It’s much easier to keep track of multiple time frames if you have multiple screens or by splitting a screen.
7. To Track Sentiment Analysis
When trading on a central stock exchange that makes it easy to access detailed information, you can use sentiment indices to track prevailing market sentiment regarding the stocks you are interested in.
Sentiment analysis helps identify the portion of traders who have taken particular market positions. Competent traders then use this data to predict the direction of the market.
For example, sentiment analysis can help predict a price reversal.
8. To Show Status on a Trading Floor
Since computers were introduced into the stock trading world, the number of computers in a trader’s space has been correlated to prestige and status.
On classic trading floors, the more senior you are, the more screens you have. It is typical to find junior traders with two or three screens and senior traders with up to 6 screens.
This is not entirely for show. Senior traders typically handle more trades and often need to keep track of more data sources simultaneously.
Necessity notwithstanding, having more screens means a trader takes up more space, which symbolizes more power on the trading floor. This stereotype has been propagated by the depiction of successful stock traders in movies.
This trend is getting outdated.
Some traders think that using too many screens can lead to information overload. Further, there’s a growing belief that an additional screen doesn’t result in a corresponding increase in productivity and efficiency beyond a certain point.
And considering that one screen can be split into multiple views to track different data streams, maybe having six screens really is just for show.
- Bloomberg: Here’s How the World’s Chip Shortage Is Playing Out for Stocks
- Quora: Why Do Traders Have So Many Terminals/PC Screens?
- The Robust Trader: Why Do Traders Use Multiple Monitors?