Sometimes when creating content for this blog, I like to look at the Google Keyword Tool to get an idea of what people are searching for. It seems that every month a fair amount of people search for the phrase ‘how to trade stocks online free’ or some other variant.
In my view, this is quite amusing since I highly doubt that there is any stock trader who became successful without spending any money first.
An expensive process
Instead, most traders undergo a lengthy process of buying books, software, courses and other products. Many of those products may be useless or even worse, scams. Rarely, they may be very valuable indeed.
And of course, once a trader has spent money on books and what not, there is usually a period of losing money to the market.
In short, learning to trade is a very expensive process. Spending a bit of money in the beginning on some good quality learning tools can actually save you a lot of money in the long run.
Nevertheless, this is the age of the Internet, and information has never been so easily obtainable. Learning how to trade stocks online, for free, is not easy but it is not necessarily impossible. So here are some ways to get started:
Learn how to trade stocks online free
Get the basics right
First of all, if you are a complete beginner I would suggest heading over to a site like Investopedia or Baby Pips as they have a large amount of content for beginners.
I would also suggest you learn about trading costs before you do anything else. You must know the impact of trading commissions and you must understand the bid/ask spread as this can seriously affect which stocks to trade and how much money can be made. At the very least you want to start trading on a level playing field.
For example, if a stock has a bid/ask spread of 5%, not uncommon in some smaller stocks, then you need to make at least 5% just to break even. On top of that, there are commissions to trade, which can be hard to overcome for smaller sized accounts.
Build a list of free resources and blogs
Next, I’d suggest going through my trading resources page. There’s a tonne of books, links, and blogs on there that are really helpful for beginners that don’t want to spend any money. OK, the books all cost money but why not print off a list and head down to your local library? Chances are good that they will have at least a few.
Or, you could check out one of the many book swapping sites like Read It Swap It. I actually swapped a cookbook once for a Jim Rogers classic
It’s also a good idea to bookmark some of the sites and blogs that you like. Use a free RSS reader like Digg and you’ll be able to see new content from all your favourite blogs as soon as it appears. Going through free content takes time, but there is no better way if you don’t have any money to spend.
Free courses & communities
Likewise, it’s a good idea to sign up for an account at a learning platform like udemy. True, a lot of the courses on udemy cost money but new courses are often offered free for a short amount of time, in order to gain favourable reviews.
Similarly, sites like Reddit are excellent places to meet other traders without spending a dime. As are other trading forums like the Trade2Win forum.
Utilize Google search
Finally, you should learn to utilize Google search more efficiently. Searching for ‘learn how to trade stocks online free’ for example, probably won’t get you very far. Whereas, searching for ‘profitable trading strategies’ in Google Scholar could yield much more interesting results.
Stock markets were relatively quiet on Friday. The conflict in Ukraine helped to boost energy prices and that kept some stocks on the back foot. I’m still holding my position in $EBIX which moved up another 0.30% on Friday.
Here’s this weeks links:
Coca-Cola to take 17% stake in Monster beverage.
Take the trading systems project from Ed Seykota.
How to blindly score 43% profit overnight in China.
Are we back to the bad news is good news routine?
Blinded by optimism, the problem of overfitting from Winton Capital.
Earnings are up and analysts are shocked.
More next week.
In order to back-test and optimise a trading system you’ll need at least two things; a back-testing platform like Amibroker, and some historical stock market data.
When it comes to historical stock data there are plenty of options available depending on what you want to do.
Historical stock market data for Amibroker
Amibroker comes with a small amount of EOD (end-of-day) historical data, for around 30 well known stocks, so the chances are you’ll want to get hold of more than that when you’re building a system. Fortunately, Amibroker provides a number of tools to make importing data quick and easy.
End-of-day data is the perfect place to start when first developing a trading system. It is cheap to get hold of, less prone to errors and contains all the features you need to build a winning system. Plus, trading on a daily or even weekly basis is a lot easier than trading intraday.
An experienced systems trader once said to me that you can find all you need in EOD US stock data so you should stick to that and first target 30% annual returns. I think it was sound advice.
Google, Yahoo, and MSN all provide free historical stock market data and when you first start out this is a quick way to get started.
By downloading Amibroker’s data downloader tool Amiquote, it is extremely easy to import historical prices straight into Amibroker from these free sources.
In fact, all you need to do is to open up Amiquote, (while Amibroker is open) and begin adding ticker symbols. (You need to use the same ticker symbols that the site you are downloading from).
I prefer to use Yahoo! so in my case I add the Yahoo! tickers like ^DJI, AAPL, or KGF.L.
All you need to do then is click on the drop down and select Yahoo Historical EOD data and set the dates required.
Then, simply click the green ‘play’ button and Amiquote starts filling your Amibroker database with the tickers and the data.
(NB It’s important to set up a new database in Amibroker before you start importing the quotes.)
Downloading free stock data is great as a starting point but it comes with it’s own limitations. Free stock market data is notoriously full of holes, even from the big sites like Yahoo! and Google.
And using data that has holes can seriously affect the performance of your trading system.
Stock market mergers, stock splits and dividend actions mean that stock market data needs a lot of work and updating to keep it clean and accurate. Erroneous prices can make your trading system look better than it is.
Consider the example of a stock split. One day, Apple is trading at $600 and the next, just $100 – as a result of a 6:1 stock split.
However, the free data may not pick this up and instead your trading system profits from a huge short move that would not have occurred in reality.
It’s crucial, therefore, for systems traders to invest a little bit of money up front in order to get hold of some good quality data.
In my opinion you can’t go much wrong with Norgate Premium Data which is clean and kept up to date by an experienced team of data experts. They take care of all the stock splits and dividend payouts so that the data is accurate and reliable.
Premium Data is also pretty affordable, in fact you can download clean EOD data for US stocks for as little as $90.
Compatability with Amibroker is straight forward too. It’s just installed as an Amibroker plug in which links up to the Premium Data downloader. The downloader imports all of the tickers using the plugin and spits them out into individual watch lists, making it easy to organise the stocks you want to trade.
Norgate Premium data also offers stock data for Australia and Singapore as well as forex and futures data. Delisted stock data is also available, all the way back to 1950.
If you are serious about trading system development, you need a serious data provider and that is what you get from Premium Data. Right now, there is a free trial for all new users to take advantage of the service.
Using Amibroker it is possible to build sophisticated trading systems with just a few lines of code. Complexity is not an important ingredient for a good trading system. The most important thing is to build a system that is based on an edge, some identifiable pattern that you have found in the data itself which you believe results in profitable trades.
Following are 20 simple Amibroker buy arguments to use as part of a trading system or not at all. They are basic and won’t make a trader any money on their own.
Make sure to test the codes before using them. I have written them up from memory on my way back from a trip so I can make no guarantees. It’s been a busy day, much work and a little play.
For more Amibroker ideas see my post on Amibroker collections.
20 Amibroker buy arguments
Buy when open crosses EMA 25
FastEMA = EMA (C,25);
Buy = Cross(O, FastEMA);
Buy when open is higher than yesterday’s close
Buy = O > Ref(C,-1);
Buy when open higher than yesterday’s high
Buy = O > Ref(H,-1);
Buy when close is higher than yesterday’s low
Buy = C > Ref(L,-1);
Buy when open higher than EMA 25
Buy = O > EMA(O,25);
Buy when close higher than EMA 50
Buy = C > EMA(C,50);
Buy on golden cross (moving average crossover)
Buy = Cross (EMA(C,50),EMA(C,200));
Buy when RSI lower than 30
Buy = RSI(14) < 30;
Buy when open is above top Bollinger Band
Buy = O > BBandTop(O,15,2);
Buy when close is below bottom Bollinger Band
Buy = C < BBandBot(C,15,2);
Buy on a Monday
buy = dayofweek() == 1;
Buy on a Tuesday
buy = dayofweek() == 2;
Buy on a Wednesday
buy = dayofweek() == 3;
Buy on a Thursday
buy = dayofweek() == 4;
Buy on a Friday
buy = dayofweek() == 5;
Buy when ADX is over 20
Buy = ADX(14) > 20;
Buy on 100 bar high
Buy = H > Ref(HHV(H,100),-1)
Buy when EMA crosses over and high is highest for 200 days
Buy = Cross(EMA(C,50), EMA(C,200))AND H > Ref(HHV(H,200),-1)
Buy after third higher open in a row
Buy = O>Ref(O,-1)AND Ref(O,-1)>Ref(O,-2)AND Ref(O,-2)>Ref(O,-3);
Buy when RSI crosses 70
VRSI = RSI(14);
Buy = Cross( 70, VRSI );
Stocks finished the week with a strong up day which means next will be an interesting one. I initiated a small position in $EBIX. The company is cheap as chips and could benefit from a short squeeze. I have bought on the recent strength and will exit the trade if the upward trend does not continue.
Here’s what I’ve been reading this week:
There’s really never been a better time to be an individual investor.
Why you should be sick of this market driven world from the Guardian.
I think it could be a good time to buy airline $CPA (Copa Holdings).
How to optimize a trading system in Amibroker.
12 rules of investing from John Lee.
That’s all for this week. JB