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.
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.