What Data Should You Measure to Improve Trading Strategies?

Choosing a broker is just the first step to becoming a successful trader. This needs to be combined with a good amount of capital, knowledge and a strong trading strategy.

In order to devise and improve existing stocks and shares trading strategies, a thorough and effective data analysis will help. Data is all the rage these days, with the rise in big data usage allowing traders to measure, view and analyse a lot to influence their approach.

With so much available, these are some good places to start measuring such information. Measure to Improve Trading Strategies


Price Changes

The first and one of the most important data streams to evaluate will be current, historical and predicted price movements.

This could be for an individual asset or a stock index, such as the S&P 500. Many trading accounts and platforms allow data charts to be customised based on specific time frames, displaying appropriate data seconds, hours or days apart.

There are various factors which affect stock prices, from and increase or decrease in supply and demand to industry news and political events.

Where possible, if there is a large spike or dip in price then see if it correlates to such an event happening, making the change in price a lot more understandable.

Volume Volatility

Data which shows how much of a certain stock or index has been traded over a certain amount of time. Even though it is a relatively simple indicator it is highly useful to measure for increasing profits and reducing risk. Increasing volume should equate to increasing prices, offering good opportunities to sell, but that’s not always the case.

Use the historical volume data and compare with price movements. Where there are instances that the price has grown while volume has fallen, be wary as this signifies a lack of interest in the stock or index. Price rises or drops on large volume is a greater signal that something in the stock has fundamentally changed, as opposed to with only a small volume.

Trading Times

When working out your optimum trading strategy you’ll need to decide whether you intend to become a scalper, day trader, long-term position trader or use a mix of all three. Each type has tits own advantages and disadvantages but choosing the right one for you may depend on your lifestyle and the specific stocks and markets targeted.

Viewing data that shows when trading activity happened can give a good sense of the best times of day to buy or sell shares. For example, if there’s a pattern of buying at a certain time then it could be a good idea to get in early and buy just before the price rises, or likewise hold off selling until it reaches the peak time.

Use Indicators

There are a wide range of indicators which can be used to analyse and filter down trading data. As part of technical and fundamental analysis these can define the data and results most important to you, ranging from simple to complex indicators.

Moving averages are some commonly used indicators which filter out random price fluctuations to identify trend directions and shows support or resistance for trading. As a technical indicator they use historical data to do so and can be combined with other indicators to help form a trading strategy.

Measuring and analysing stock market data is vital if you hope to develop a winning trading strategy and reduce risk.

DISCLAIMER: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures, stocks and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. The highly leveraged nature of futures trading means that small market movements will have a great impact on your trading account and this can work against you, leading to large losses or can work for you, leading to large gains.

If the market moves against you, you may sustain a total loss greater than the amount you deposited into your account. You are responsible for all the risks and financial resources you use and for the chosen trading system. You should not engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. If you do not fully understand these risks you must seek independent advice from your financial advisor.