Apple | Google | Spotify | Stitcher | Soundcloud | YouTube
In today’s episode, you’ll discover 5 trading tools to improve your results in no time.
So tune in right now…
How Long Does It Take to Become a Consistently Profitable Trader?
The Best Online Trading Tools for Traders (Free)
Hey, hey, what’s up my friend? In today’s episode, I want to share with you 5 trading tools which can help you improve your trading results fast.
Tool #1: Trend filter
Let’s say you trade stocks and you’re wondering if this is a good time to be buying in the stock markets and stuff like that, then you can use a simple trend filter like a moving average.
You can overlay the moving average over the index of whichever market you’re trading.
If you’re trading the US stock markets, you can use the S&P 500 as a benchmark and overlay the S&P 500 with the 100-week moving average:
- If the S&P 500 is above the 100-week moving average, you can conclude that the longer-term trend is up and you can look for buying opportunities in the stock market.
- If the S&P 500 is below the 100-week moving average, then the overall stock market sentiment is bearish and you’ll hold on to cash.
This is a simple trend filter tell you if you should be buying stocks or holding on to cash.
Tool #2: Rate of change
Here’s the thing, when you trade stocks, there’re thousands of stocks out there.
Let’s say, for example, you trade the US stock market where there are thousands of stocks, how do you know which one to buy or focus on? How do you know which one has a higher probability of going up in price?
This is where you can use a tool called the rate of change where it simply tells you what the percentage change in the price of a stock is over a given period. I recommend ranking the stocks according to their rate of change over the last 50 weeks.
The stocks with the highest rate of change are the that have increased the most in price over the last 50 weeks. Academic researches and even my backtesting have found that strong stocks tend to continue to outperform the market, whereas weak stocks tend to remain weak.
So you should rank the stocks according to their 50-week rate of change and focus on buying those stocks that have increased the most in price over the last 50 weeks.
You can use a free platform like Thinkorswim from TD Ameritrade, which has a stock scanner built-in to allow you to scan for stocks according to their rate of change.
Tool #3: Trading books and research papers
I want you to focus on trading books that come with a specific set of trading rules and system with backtest results to show for (not just any ordinary trading books).
And the reason for this is that based on my experience, the authors who dare to share their trading rules with the backtest results are likely backed by proven concepts and they actually did the hard work.
If not, they wouldn’t want to tarnish their namesake by putting something that is not proven to work. Usually, these are books that are worth diving deeper into.
You can check out some of these:
- Unholy Grails by Nick Radge
- Following the Trend by Andreas Clenow
- Stocks on the Move by Andreas Clenow
- Mean Reversion Trading Systems by Howard Bandy
These are just some examples off the top of my head. These are people, books and stuff that you can check out to see if you can get any trading ideas or strategies from their sharing.
Research papers, on the other hand, are more academically written, so it’s not as easy to read as books.
But if you’re prepared to do the work, you can go down to ssrn.com where they have a collection of all these different research papers that you can look into and find out new trading ideas or strategies that you can implement to see if it works for you.
Tool #4: Backtesting platforms
I can’t emphasize how important this is, because what a backtesting platform does is that it can take your trading rules that you have developed to test across historical data and see in a matter of minutes whether your trading strategy works or not.
Some of you might be thinking that just because a strategy works in the past, does not mean that it’ll work in the future. I perfectly agree with that.
But let me ask you, would you take a trading strategy that doesn’t even have good backtested results to trade in real-time? Of course not. What hasn’t worked well in the past during the backtest is also not going to work well in the live markets.
So backtesting helps you filter out what works and what doesn’t. Yes, there’s no guarantee that it’ll work in the future, but it does put the odds in your favour. Especially if you’re testing robust trading strategies.
If you can prove these concepts through backtests, there’s a good chance that they could work in the future in the live markets. But if that trading strategy has failed during a backtest, then you won’t want to trade it in the live markets.
Tool #5: Upwork.com
For those of you who don’t have programming knowledge like me, you can go to Upwork and look for freelance programmers to help you with your backtesting or whatever programming that needs to be done.
There’s no excuse because, in one way or another, you’ve got to invest your time. If you don’t invest your time, then invest your money. If you don’t invest time and money, then you shouldn’t be trading.
With that said, let’s do a quick recap…
- Trend filter – buy stocks in an uptrend but hold onto cash during bear markets
- Rate of change – focus on buying the strongest stocks out there
- Trading books with backtest results or even trading research papers
- Backtesting platforms
- Upwork.com – look for freelance programmers to help you with your trading needs
With that said, I wish you good luck and good trading. I will talk to you soon.