Trade Advice From the Pharaohs
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Alongside choosing the right charting software for trading success I would offer you three invaluable gems of trade advice.
1. Avoid black box systems – they don’t work
2. Get a package that meets your criteria and works
3. Get a data provider that answers our five questions below alongside your charting software.
Black box systems
No matter what charting software you do decide to go with, it is important to recognise that software is simply a tool that aids a trader in undertaking his business activity. Beware of software packages that do everything for you. These are commonly referred to as ‘black box systems’.
Black box systems are typically computer programs in which the system spits out recommendations based on hidden pre-programmed logic. The problem with these types of systems is that you don’t know what’s going on behind the scenes, you just get a list of buy and sell recommendations, without any explanation or understanding of how they’re created. They’re not tailored to the individual and, in my experience, simply don’t work.
In general, traders who believe the myth that you can just hand over your hard-earned capital to a computer program, sit back and collect cheques, are living in a fantasy land. Sure, they want to make the money successful traders do, yet they do not want to put in the hard work necessary to develop the skills needed to become and stay successful.
Your time and money is best spent elsewhere.
The charting software package I use is MetaStock. It’s easy to use and ticks all the boxes in terms of the six criteria I’ve outlined above: It’s been around for over ten years, has a strong user base with well-populated forums and offers plenty of user support.
MetaStock’s formulas are based on popular spreadsheet programming language so if you can use Microsoft Excel you’ve already got a good head start. Its exploration module gives the user the ability to scan through tens of thousands of securities at once, identifying only those that meet predefined criteria. MetaStock has a fantastic back testing add-on and doesn’t force you into any specific data package.
While I do I recommend MetaStock, these are some other packages worth looking into, including: Advanced Get, OmniTrader, SuperCharts, AmiBroker, Market Analyst and TradeStation. I’ve heard good reports about all of these packages but haven’t used them in great detail.
Whichever package you choose, take the time to learn it inside and out. When system designing, you don’t want to be limited by lack of knowledge. If you can conceive it, you want your package to be able to deliver it.
Advice on Collecting data . . .
No trade advice on charting software would be complete without talking about market data. Yes, some software packages offer their own data feeds, but my advice on trading is to you look at third party data feeds because they’re usually more cost effective. Which data provider you go with will vary depending on which software and market you decide to trade.
Start by asking the following five questions of your data provider:
1. Do they support multiple markets?Although you will have selected only one market on which to concentrate,it’s important that you have access to data for multiple markets in case you decide to change markets down the track.
2. Do they provide fast download and data distribution? Your time is far better spent identifying profitable trading opportunities than waiting for data to download. Choose one that downloads and distributes quickly.
3. Do they provide automatic database maintenance? The effects of splits, name changes and additions will drive you crazy if you have to input them manually. Your data provider should be able to provide these updates for you automatically.
4. Do they provide the ability to quickly and easily create custom folders? No matter what charting software you’re using, this is critical for enabling you to conduct more efficient analysis. It will save you hours of time in the long run.
5. Is the data provider here to stay? Changing providers costs time and money. Select one that has a good track record and will be around for the long term.
Let’s recap on all this trade advice. Avoid black box systems – they don’t work,
get a package that meets your criteria and works, get a data provider that answers our five questions above.
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