Professional traders use Excel on a daily basis to generate trading signals and manage trades. Average traders tend to rely only on charting programs or poorly designed and tested systems. Adding Excel to your repertoire can bring significant benefits in terms of control, efficiency and profitability. You just need to learn a few things about Excel and how to integrate it properly into your trading process.
There are many ways to use Excel for trading, and your first consideration should be narrowing down your intended use of the tool. Will you use it to compute trading signals? Is your interest importing data automatically into Excel? How about calculating profits, drawdowns, risk and other analytics? Do you have many open positions you need to track? Would you like to integrate Excel with a charting platform? Are you interested in automating your workbooks with VBA to increase speed and accuracy?
Bringing price and volume data into a spreadsheet automatically is one way to implement Excel for trading. This uses DDE links to a price data database, either an internal or vendor provided database. DDE links are efficient and can capture fast moving prices (with certain limitations relevant to algorithmic trading). Importing price and volume data into Excel with web query functionality is an alternative to DDE links. This works if you want to capture a smaller volume of prices or economic data from websites like Yahoo Finance, Google Finance, etc. You can also import data into Excel using the Data from Other Sources function. This connects to SQL Server, MS Analysis Services, XML files and ODBC -- this is a good option for the technically minded.
Excel for trading depends on data. Once that's imported, what will you do with the data? Good options are watch lists, blotters, P&L statements, portfolio trackers, trade logs and heat maps. These can be used for intraday or historical analysis, trading performance, risk and trade management. Analytics like delta, drawdown, maximum adverse excursion, maximum profit realized or stop loss points can be calculated and displayed. There are unlimited uses of Excel for trading so feel free to let your imagination flow.
Best practices of Excel for trading involve planning your spreadsheet workflows and relationships so everything works together correctly and you can find what you need when you need it. You have a choice here of building a multiple spreadsheet environment or creating a single workbook with lots of tabs. The prior approach is modular and tends to work well because each separate workbook is for a specific purpose, small, and easy to manage. The downside is you may need to manage lots of links and Excel links have a tendency to break and get corrupted. Big workbooks with lots of sheets can be useful in Excel for trading since you have everything in one place. However, Excel tends to bog down and the files get huge when you start using more than 10,000 rows of data, charts, and multiple tabs together. It can also be a bit risky to have your whole daily trading operation in one file. Just make sure you back up your files in an external location every day!
Hopefully these concepts will be useful in kick starting your Excel for trading.
There are many ways to use Excel for trading, and your first consideration should be narrowing down your intended use of the tool. Will you use it to compute trading signals? Is your interest importing data automatically into Excel? How about calculating profits, drawdowns, risk and other analytics? Do you have many open positions you need to track? Would you like to integrate Excel with a charting platform? Are you interested in automating your workbooks with VBA to increase speed and accuracy?
Bringing price and volume data into a spreadsheet automatically is one way to implement Excel for trading. This uses DDE links to a price data database, either an internal or vendor provided database. DDE links are efficient and can capture fast moving prices (with certain limitations relevant to algorithmic trading). Importing price and volume data into Excel with web query functionality is an alternative to DDE links. This works if you want to capture a smaller volume of prices or economic data from websites like Yahoo Finance, Google Finance, etc. You can also import data into Excel using the Data from Other Sources function. This connects to SQL Server, MS Analysis Services, XML files and ODBC -- this is a good option for the technically minded.
Excel for trading depends on data. Once that's imported, what will you do with the data? Good options are watch lists, blotters, P&L statements, portfolio trackers, trade logs and heat maps. These can be used for intraday or historical analysis, trading performance, risk and trade management. Analytics like delta, drawdown, maximum adverse excursion, maximum profit realized or stop loss points can be calculated and displayed. There are unlimited uses of Excel for trading so feel free to let your imagination flow.
Best practices of Excel for trading involve planning your spreadsheet workflows and relationships so everything works together correctly and you can find what you need when you need it. You have a choice here of building a multiple spreadsheet environment or creating a single workbook with lots of tabs. The prior approach is modular and tends to work well because each separate workbook is for a specific purpose, small, and easy to manage. The downside is you may need to manage lots of links and Excel links have a tendency to break and get corrupted. Big workbooks with lots of sheets can be useful in Excel for trading since you have everything in one place. However, Excel tends to bog down and the files get huge when you start using more than 10,000 rows of data, charts, and multiple tabs together. It can also be a bit risky to have your whole daily trading operation in one file. Just make sure you back up your files in an external location every day!
Hopefully these concepts will be useful in kick starting your Excel for trading.
About the Author:
Using Excel for trading involves selecting and applying the right techniques and tools. Find out more here.
No comments:
Post a Comment