No matter whether you use charts or analytical trading software, or trade stocks, futures, forex or options, timely price data is important to the trader.  This article is about price data and where you can get it and what you need to consider before obtaining price data.

The first thing to consider is your timeframes.  Will you be trading on tick data, or using end of data data?  Generally the more frequently data is updated, the more it costs, and the larger is the download.  End of day data is often available for free, but live streaming tick data will certainly cost you (or your broker). Remember that with tick data, you will often need to sample the points in order for your system to make sense of the data, so it may be better just to buy 10 minute data, unless you follow the markets very closely.

Also consider whether you need live data, or are happy with delayed data.  Delayed data is considerably cheaper, but may not suit you if you are trading using a news driven strategy, or if your trading model has very tight stops.

Do you need data for trading, or historical data for testing?  If you only need testing data, you should consider buying historical data, which is generally cheaper than more frequently updated price data.

What does your broker provide?  Most brokers need to provide live data so that you can place trades, but it is generally difficult to use this data in your own trading software.

How will you obtain the data?  Ideally if you are using trading software like Metastock Pro, you will want data that can be automatically read into your system.  The least preferred option is to have to input data manually off a web page, even a CSV download is better than that.  I have found that the majority of data available to individual traders relies on the Windows operating system, so if you use a Mac or Linux, you’ll need to consider

You can obtain free end of day stock data through Yahoo Finance, or generally your broker can provide what you need, if you don’t mind inputting it yourself.  Whilst some packages can import free data, if you seriously need to screen a lot of stocks through your trading software, you should seriously think about buying data.

From my own experience, it is false economy to rely on free data.  The main problem is the reliability and continuity of the data.  Data is the raw material of trading - if you want to play this game and put your trading money on the line, you need to invest in accurate and reliable data.  Accuracy and reliability costs, and that is why you must pay to get it.

I built a script to read end of day data into a large database and all seemed well.  Then days started to be missed, then eventually the data ceased.  I would have been better off with commercial data, which would have been more timely and reliable.  In addition, I found some data inaccuracies in the free data.  Commercial data suppliers spend a lot of effort to ensure that their price data is accurate.

When you purchase forex data, remember that there is no centralised forex market.  The data you obtain will be different from vendor to vendor. Generally the good vendors spend time and effort on ensuring that the data they provide is as accurate as possible.  This means that it is obtained from multiple sources and processed.

Remember that price data is the lead that your trading system will hopefully turn into gold.  No lead = no gold.  So don’t scrimp on your data and make sure that you have what you need.

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Tags: end of day data, free price data, Price Data, tick data

This entry was posted on Sunday, May 25th, 2008 at 9:10 am and is filed under Trading Basics. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.