Before summer started, my son was learning probability at school and his teacher gave his class some interesting questions to solve. The background is that they’ve just learned fraction, decimal numbers, etc.
(Lawrence: This is a copy of the article I have written for the new daytradingbias.com site last week. Enjoy!)
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Using direct connection has its advantage (over Wi-Fi)
It is best to use direct connection (i.e. with ethernet cable and all that) over Wi-Fi connection, because it can remove one potential cause of disconnect easily. Interference within your home can sometimes disconnect your computer from the Internet.
For example, there are some wireless home phone that, when in use, can drop your computer’s Wi-Fi connection quality significantly. If you experience data lag or disconnect when you are on the phone, then see if you can move the base of the wireless home phone away from the computer to improve the situation.
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One of the very rare calendar date based statistical bias happens on April’s Fool. No joke!
The Phenomenon
March 30 and March 31 each date produces an accumulated -15% return (non-compound, close to close) on Dow or S&P 500.
Then on April’s Fool, a whooping +15%. It is not the strongest performer in terms of calendar date bias, but definitely enabling the market to wipe out the losses made in the 2 prior trading days.
Maybe the stock market likes to pull a prank on its players too.
Note: Data collected over the past 50 to 60 years.
We have worked with many clients to setup their computers to work better with real-time data streaming and trading purposes. Here are some tips (and funny stories) that work very well to maintain your internet connections in prime condition.
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Managing your subscription with eSignal sometimes can be confusing. Here is some tips and information that are useful for both new and long time subscribers of their services.
Delay data for specific region has to be added manually
Some data feeds (including eSignal several years ago) automatically provide delay data for exchanges you have not signed up for real-time streaming. Due to the fact that eSignal has grown into an international data provider, there are way too much data to send out on all exchanges that you have not subscribed to.
Limitation on historical data access during peak hours
During the first and last trading hour when the US stock market opens, some limitation to the amount of historical data you can download is imposed.
If you expected to load a lot of historical data, especially tick data, then it is better to do that before market open.
Historical bid/ask data are available to subscribed exchanges only
For those traders interested in bid/ask analysis, it is important to know that you need real-time subscription to get historical tick data that includes the bid/ask data. If you do not have the subscription, the historical tick data you download would include the trade data only.
Extended historical data option does not work with 3rd party applications
eSignal has not added this option to their API, thus 3rd party applications cannot access those extra historical minute data even if you can see them within eSignal’s own software.
For most traders, when tracking their own performances, or measuring the performance of trading systems, a tendency is to look for almost perfect improvement over time. We always want the performances to get better, stay in top shape, etc. In reality, such push can be harmful and can backfire.
Attached is an Excel spreadsheet showing the potential reason why and how to monitor trading performances using a relaxed condition that works well over the long term.
The Spreadsheet
An example of using the Cone Projection indicator in real-life.
Emini S&P 5-minute with 100 days of data loaded. Cone Projection parameter using daily break, lookback period of 90.
What does the indicator do?
It utilizes the moving average by step indicator to figure out the potential high/low at any point in time at the chosen break period. In our example, it figures out how far on average the price would move from open of the day to any particular point in time.
The red lines are the averages and the blue lines are 1 standard deviation away.
How to use the indicator?
The indicator provides a projected path of support and resistance over time based on your break criteria. In the example, the projection is based on Day break, thus you can see the projection for the whole trading day beforehand.
For a range bounded day, travelling from one end of the average to the other often signal completion of a move, as illustrated by the 2nd and 3rd day in the chart.
For a trending day, the market will stay between the average and the one deviation zone, as in the first day shown in the screenshot.
Many traders learned the importance of keeping records of all their trades. There are even software to help you analyze your performance by compiling tons of statistics, etc. I have here a simple spreadsheet that I think will be useful no matter you are a system or discretionary trader.
Many people asked why would anyone want to analyze the charts at the tick level. Wouldn’t that be a waste of time since such high frequency activities are not likely going to have any long term impact.
Let’s take a look at this chart first.
Top pane is Google stock price at 5-minute interval, since the beginning of December 2008.
Second pane is, the histogram of the moving score of 1000 trades, where each trade involves at least 1000 shares. A trade at the asking price gets a score of 1, and a trade at the bid price gets a score of -1. As you can see, the result is a momentum indicator providing some insights into the strength of the price series.
Third pane is, the histogram of the moving score of 1000 trades, but each trade involves at least 5000 shares.
Notice how profound that the lowest and highest swing points in the price matched perfectly with the histogram in the third pane.
It is a simple example showing large sized orders, in general, move the market. This information, however, cannot be derived from the price series. One has to dig deep into the tick data to have that extracted.
As of September 22, 2008 (tomorrow), Kraft Foods, symbol KFT, will replace AIG in the index.
For NeoTicker users, just make the change in the Dow 30 symbol list will be enough for NeoBreadth, Pattern Scanner, etc. to function properly on Monday.
Updated symbol lists will be provided in next release.