From the August 01, 2011 issue of Futures Magazine • Subscribe!

The data game


Besides working with clean data, a trader must make sure that his data works seamlessly with the technical analysis program he is using. One thing to consider is purchasing a software program that is compatible with many data providers. This will ensure that if there is anything wrong with the data-feed of one vendor, he can move quickly to another vendor without having to buy new software.

For those traders using historical data, it is important that the data has been filtered after the end of the trading day and before it is distributed. This is important especially to those who run end-of-the-day signals prior to the next day’s opening. There is no worse feeling than to create a list of buy and sell orders to execute, only to find the data you were working with was wrong and corrected the next day.

Traders using historical data also should look for vendors that offer data exporting. This is important if you are working with a program that includes portfolio tracking or management software. Often a trader will have two software programs, one that analyzes the markets and another that manages the trades. One of these programs may be incompatible with the data-feed. Rather than spend the money on two feeds, verify that you can export the data and the problem will be solved.

The bottom line is, verify that your data vendor is providing you with clean data that is 100% compatible with your analysis software package. In addition, become familiar with your vendor’s process for cleaning up bad data points and the timeliness of such corrections.

Besides working with an analysis software program’s technical indicators, some traders may want to utilize the program’s backtesting and system optimization capabilities. The success of this trading process relies completely on the accuracy of the data as well as the ability to manipulate it to fit your trading style or trading system requirements.

One key element that a software package or data provider must give you is the ability to create continuous contracts (see "Customize"). Futures markets are specific in the way they trade in a series of short-term contracts that are active only as the near-term contract for a short period of time. This is different than stocks or forex markets that offer a continuous stream of prices. To backtest a system on historical futures data, you need to patch together the futures prices to generate a similar continuous stream of prices.


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