Developing your trading ideas with web 2.0 tools
In a recent blog post, I noticed that, in the
wake of the market selloff on the election news, alternative energy stocks such
as Ballard Power Systems (BLDP) were rallying sharply. That observation early
in the trading day made for a very nice daytrade. It might, however, also frame
a worthwhile longer-term idea for investment. How can we research the idea’s
potential?
It turns out that there are several relatively
new tools available to online investors that organize a wealth of relevant
information for trading ideas. What was once the privileged information of
large institutions now belongs to the trading public, thanks to
the Web 2.0 social revolution in computing.
So let’s look at how some of the Web 2.0 tools
might help us research our BLDP idea.
First, we take a look at
the StockTickr site developed by Dave
Mabe. This social investing service allows you to create and track your own
watchlists, as well as maintain an online journal with your trading results.
The power of the site, however, lies in its social nature. With your
authorization, others can view your watchlists and journal and you can view
theirs. This allows you to see
who else within your trading community is following BLDP, whether they’re
trading it, and what they think of it. You can also
track other stocks within the same industry, how they’re performing, and
their trading patterns.
Suppose, however, you also want to see how the
pros are trading BLDP. In that case, you move on over to
the StockPickr site developed by James
Altucher. This very worthwhile site tracks the holdings of major institutions
and hedge funds, letting you know who is buying your stock. When we enter BLDP
into the search engine, we get a chart of the stock, links to news items, and a
list of pros and subscribers who own BLDP in their portfolios. As it happens,
only 3 portfolios–none from the pros–track this stock. This suggests that the
issue is under the radar at an institutional level. When I click on one of the
portfolios, the TM Star Securities House Account, I find other stocks, some of
which are related to BLDP and owned by institutions, such as Energy Conversion
Devices (ENER). This provides yet another source of insight for trades.
If I want a broader view of BLDP, I can go to
the InstantBull site, which aggregates
posts from the major market bulletin boards and blogs. Entering BLDP in the
search engine gives me access to all posts from Yahoo!Finance, MarketWatch, and
much more. The menu at left accesses the major financial portals, so that you
can dig up a host of fundamental data on the company, including SEC filings and
analysts’ reports. You can also access the major market blogs and conduct your
own queries of their content. From one site, it is possible to track the
stock’s historical price performance and the company’s performance as a firm.
Yet another fine aggregator site is
Seeking Alpha. Entering BLDP into their search engine provides me with
opinion and analysis article links, a chart of the stock, and summary data. New
articles dealing with your stock will be sent to you directly via RSS, keeping
you updated automatically.
Finally, let’s say we want to develop a specific
trading idea for BLDP. The Barchart site
includes a performance feature that tracks how stocks fare on several different
technical trading systems. We find out, for instance, that, over the past two
years, BLDP has profited nicely from a trading system that buys upside breakouts
of the 50-day moving average and sells downside breakouts of the average.
Specifically, we’ve had 18 trades during that time averaging 41 days per trade.
Seven trades have been winners, eleven losers, with frequent whipsaws. The size
of the winners, however, has been much larger than the size of the losers,
enabling the system to make $7.50 profit per share. Not bad for a $7.00 stock!
The site also charts the stock and provides technical indicator data, as well as
sector data.
Web 1.0 brought traders a wealth of information.
The current Web 2.0 paradigm organizes this information in user-friendly ways
and delivers it direct to the desktop. It’s now possible for every trader to be
a market analyst–and an informed stock picker.
Note: I have no commercial affiliations
with any of the firms or products mentioned in this article.
Brett N. Steenbarger, Ph.D.
is Associate Clinical Professor of Psychiatry and Behavioral Sciences at SUNY
Upstate Medical University in Syracuse, NY and author of
The Psychology of Trading (Wiley, 2003). As
Director of Trader Development for Kingstree Trading, LLC in Chicago, he has
mentored numerous professional traders and coordinated a training program for
traders. An active trader of the stock indexes, Brett utilizes
statistically-based pattern recognition for intraday trading. Brett does not
offer commercial services to traders, but maintains an archive of articles and a
trading blog at
www.brettsteenbarger.com and a blog of market
analytics at
www.traderfeed.blogspot.com. His book,
Enhancing Trader Performance, was recently
released for publication (Wiley).