Learn Stock Trading: Can I trade All Timeframes with EOD Stock Market data?
This is one of the trading questions that I have received from one of my readers who is on the path to learn stock trading profitably... "When I use end of day data can I trade all time frames with it?"
End of day data (EOD for short) is data that you download after the markets have closed for the day, or after some pre specified time if you are looking at 24 hour markets like forex.
Typically when we talk about EOD data we are referring to daily price data where you get the open, high, low, close, volume and open interest for the day. When you view daily EOD data on a price chart one bar represents a single day's trading activity.
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Once you have this end of day price data your charging package can automatically plot daily, weekly, monthly, quarterly and yearly price bars. This is perfect if you are using a low touch daily or weekly trading system where you make trading decisions once a day or less frequently.
What you can't do with daily EOD price data is trade using timeframes shorter than one Trading day. For example if you are a day trader and you would want to make trading decisions based on charts which have price bars representing from say 1 minute to 4 hours. You can't do this with daily end of day price data.
Daily end of day price data is my preferred data feed because I use medium to long term trading systems and I only make trading decisions once each day.
Data for day trading is more expensive, more difficult to handle and typically has less price history than end of day price data.
One note of caution that I would give is that you really need to use data that is right for your purpose. If you want to make intra day decisions (i.e. daytrading) then you really need data that is more frequent than just daily price bars.
Do not try to design a day trading system using only end of day data because IT WILL NOT WORK!
You may be tempted (as I have been at some point in the past) to try to design a system that enters and exits during the trading day using just daily price data. The problem with this is, while you know the open / high / low / close of the day, you do not know what order the high and low occur in, nor do you know what happened in-between. These four examples below illustrate the problem of trying to use daily price data to design shorter term trading approaches. You just don't know what happens in what order.
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In each of the four charts above the price movement throughout the day (the squiggly line) is totally different, but the daily price bar that is generated is exactly the same. This is why you can't use daily price data to make decisions on lower timeframes of data.
But I still believe EOD trading systems are the best option for most people and EOD price data is all you need to design great EOD trading signals. The warning is just that you must know what data you are using and what you can and can't use it for.
I do not encourage new traders (or experienced ones for that matter) to use timeframes shorter than a day. It is difficult, commissions are high relative to profits, average profit per trade is very low and it takes a lot of time.
I like end of day trading signals and trading systems much better than day trading signals because you can get a much higher return for your effort and you don't have to stare at the markets all day to make money.
Want to Learn Stock Trading Quickly...
If you want to learn stock trading and have someone guide you every step of the way so that you can stay in control and learn how to profit quickly then check out my unique new program by clicking the image on the right.
I would love to help you learn stock trading quickly and address your trading questions for you!
Click the image and enter your email to find out more about this unique new program which allows you to learn stock trading quickly with the support you need.
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