Financial Trading Software?

finance-geek asks: "What software do you use for trade evaluation? Are there any good free programs out there? I am a former programmer now working at an investment fund, and I am shocked at the limited number of applications for evaluating and back-testing trading models. We currently use Wealth Lab , but since they were recently purchased by Fidelity, we are less certain about the future of their customer service. I checked out SourceForge.net but only a few programs looked interesting, and it will take me a while to evaluate them. Any suggestions?"

Comments

ETF Timing

[(eternal_software)]

Although it doesn't let you input your own data, I have found ETF Timing's (www.etftiming.com) approach to trading logical and accurate. They provide market timing on ETFs (sorta like mutual funds, but traded like a stock), and have been quite accurate during the length of my subscription (about 6 months).

It's not free, and I'm not generally one to plug a specific site or product, but it is on-topic.

Re:ETF Timing

[afabbro]

Slight correction: ETFs are Exchange Traded Funds, which are a basket of stocks put together as a sort of mini-index. You can buy them through nearly any brokerage.

You can market time them. You can market time anything. That doesn't make it a good idea. You need extraordinary gains to overcome brokerage fees and taxes (which are higher since you're not holding them for at least a year).

If you want my advice...read _A Random Walk Down Wall-Street_ and unless you have the equivalent of several full-time jobs to devote on an ongoing basis, buy broad indexes (e.g., Wilshire, with S&P 500 being a second choice) and get on with your life. If you're socking away a thick 401K + Roth IRAs for most of your working life, you'll retire rich and making 12% instead of 10.5% (historical S&P 500 average) isn't going to make that much of a difference...but making 3% once you factor in your losses from amateur play sure will.

All deference to the Warren Buffets of the world aside, very (very!) few pros, usually backed by huge research desks, beat the S&P 500 over the long term. That's just as true for small funds as large ones.

Again, _A Random Walk Down Wall Street_ is the best book on investing I've ever read and I highly recommend it.

Re:ETF Timing

[Sanction]

While "random walk" is interesting from a theoretical standpoint, it is no more gospel than the "efficient market" theory or others. I would highly recommend it as an interesting book.

The one point I really must take issue with is that the difference between 10.5% and 12% is minimal. If you start saving for retirement at 25 with a small account, say $5000, and contribute $200 monthly until retirement at 65, that extra 1.5% will translate to an additional $1,155,622 at retirement. That is well worth the extra work for me. You do suffer some slippage from brokerage fees, but these days they are pretty minimal. I think far too much weight is given to tax concerns. Regardless of the rate you pay, profit is profit, and a 25% gain on a transaction is still a very healthy return even after fees.

I'm not advocating "market timing" as it is often used, and definitely not day trading, but someone with a solid grounding in fundamental analysis to pick stocks and technical analysis to know when to get in and out of the market can do very well. While institutional investors may have a hard time upon occasion, small investors are able to invest in lots of things that mutual funds are not allowed to invest in because they would hold too large of a position. Snagging promising small caps based on fundamentals and exiting on technicals after they grow enough to be picked up by the big fish can usually get you far better returns than any mutual fund can. It does take some time and education, but we all need time for some hobby or another ;)

Data is the challenge, not the software...

[kjeldahl]

Based on my experience, the challenge is not the software but getting access to updated, correct and historical data. Mechanical Investing is a disipline that seeks to make investment decisions based on objective rules rather than subjective measures (typically "chart reading"), and attempt to measure the success of a strategy with extensive backtesting using historical data. Currently, the most common data sources are ValueLine reports, Stock Investor PRO (from aaii.com) or IBD (investor.com). Getting access to historical data, keeping the data clean and current and "normalize" it for any changes the providers do over time (and they DO change their formats every few years) is the big challenge, not making the software that uses that data to simulate strategies.

And if you want intra-day data, the data problems become even bigger. I guess quite a few of the Technical Analysis services have historical data for testing TA models, but from what I have found there are few cheap and good sources for fundamental company data which also offer historical data.

GeniusTrader, and optsys (soon) for options...

[Stile 65]

I'm glad I saw this thread.

First, check out GeniusTrader, which is a very usable tool for backtesting strategies.

A friend of mine and I are writing software for backtesting options trading strategies. It will also be GPLed and some of the architecture is based on the way GeniusTrader did things. GeniusTrader is written in Perl and optsys is being written in C++.

optsys, or what's been done of it (it's in maaaaaaaajor pre-alpha state right now, most features aren't even working yet) is available here, but since I'm running the server on my home PC, it's only up about 14-18 hours a day. GeniusTrader, however, is immediately usable and they have quite a developer/user community now.

Some software ideas

[MacRonin]

One i've been meaning to check out is

TA-Lib: Technical Analysis Library at http://ta-lib.org/

Windows and Linux technical analysis open-source software library allowing to maintain and process financial data. Provides RSI, MACD, Stochastic, moving average... plus SQL, ASCII, Yahoo! stock market data access. Works in C/C++, Perl, .NET. Source code included.

Another: http://eiffel-mas.sourceforge.net/

and one more library: http://quantlib.org/

Technical Analysis? Why not buy lottery tickets?

[Fished]

here's my unrelated, off-topic, unsolicited opinion - your mileage may vary.

I've watched several people go broke on the gospel of technical analysis. To me, the tell-tale is that I never hear people who are into technical analysis talk about their total return, after taxes and commissions. Instead, I always hear them talk about the stocks they made money on. I happen to be privy to my father's portfolio, and using technical analysis, churning his portfolio, paying taxes, he has made 8.3% a year over the last 10 years. And he more or less does this full time since his retirement.

In the same period, I've averaged 17% APR, even allowing for the .com dive. My dad makes a killing on a few stocks, but in the long run he loses because of the stocks that he makes a little bit on, but not enough to cover his brokerage fees.

My advice is this: pick a few companies whose product you believe in. Figure out what their historical P/E is. Compensate for the fact that P/E's are going up nowadays (I usually allow 20:1 where traditional value is 14.5:1.) Then estimate -- and here's the art of it -- where their earnings are going in 3 years. If the P/E based on future earnings is less than your target P/E, buy.

Then, /ignore/ "the market". I mean it. Look at your portfolio once a month, and whatever you do don't watch CNNFN or pay attention to analysts whose main interest is to get you to churn your portfolio. Buy and hold, and pay attention only to your companies' BUSINESS, not the market.

Maybe some of you can make TA work for you. If so, more power to you. But my money's on buy-n-hold. TA isn't investing, it's trading and gambling. Doing research for more effective TA doesn't make it not random any more than reading the sports pages makes betting on sports not random. And you don't really need any software to do it, although Quicken might be nice. As far as a book, I'd recommend "Stocks for the Long Run" by Spiegel. He goes into a lot more detail than the Lynch's of the world. Also, get yourself a good book on reading balance sheets. You'll need it.

Qtstalker

[Anonymous Coward]

This is an OSS project hosted on sourceforge: http://qtstalker.sourceforge.net.

From the SF description: "Stock market, commodity and technical analysis charting app based on the Qt toolkit. Extendible plugin system for quotes and indicators. Portfolio, back testing, chart objects and many more features included."