Wealth Lab vs TradeStation for Back Test

At the Trader’s Expo I watched portions of presentations on two different back test tools: TradeStation and Wealth Lab.   The most striking differences between them were not in functionality but in following.   The TradeStation talk in the exhibition theater area was packed, with people standing to watch.   Wealth Lab was discussed in a private room with very light attendance.

The difference in venue is not the root cause.  The (new) owners of Wealth Lab, Fidelity, restrict access to only customers trading in excess of 130 times per year with Fidelity.  If this limited access is a marketing ploy to get more active traders for Fidelity, I’d hazard a guess that its not working.

Too bad Wealth Lab is kept locked away because it sounds like it has features which are lacking in TradeStation.  Portfolio simulation, for example, is a capability often requested by TradeStation customers which is already available in Wealth Lab.

TradeStation, on the other hand, offers futures and forex which Wealth Lab does not support.  It also appeared as though Wealth Lab required more effort than TradeStation to set up the data for even basic back tests.

 As it stands, I’ve put TradeStation to work for a lot of back tests and didn’t see enough compelling capabilities in Wealth Lab to go through the pain of both switching software and lining up 130 trades per year at Fidelity.

What about you?  Which tools are you using?

S&P 500 Analysis with MACD Divergence

In my previous post I mentioned that I found interesting videos from Adam Hewison.  Click here for a timely example which includes MACD divergence analysis of the S&P 500 near the end of the video.  (no registration required to view the video)

 

Free Email Trading Course by Adam Hewison

 I get Google alerts on every MACD blog posting which is quite a lot. Most are not noteworthy and some are downright off base, but every once and awhile, a really good post on MACD comes along. That happened most recently when I came across a well-done video by Adam Hewison using MACD and MACD divergence. I liked it well enough to see what else he had to offer and now have some goodies to share with you. See the guest blog post below from Adam Hewison. You can sign up for his free email trading course by clicking here.  I’ve taken the first lesson so far and thought it a succinct and timeless lesson. 

First of all I want to thank you for having me as a guest today!

My name is Adam Hewison. You might want to Google Me to confirm what I am about to share with you.

There are plenty of people out there that create “exclusive email courses” with little or no credentials to actually backup their teachings. So, I think it’s right that I share a little bit about myself with you before we even start.

I was a former floor trader on the IMM, IOM, NYFE and LIFFE as well as a risk manager of a large, multinational corporation in Geneva, Switzerland. I also have written books on forex trading and trend following. In 1995, I founded INO.com and later co-founded MarketClub. I’ve been in the trading biz for over three decades and have seen it all. I created this course as a way to give back and share trading tips and techniques that I still use in my trading today.

Click here to begin.

In my Free Mini Email Course, I will show and explain the tools and strategies you need to increase your success rate in the marketplace.

(1) The importance of psychology in price movement

(2) How to spot mega trends

(3) Understanding of technical price objectives

(4) How to picture price objectives

(5) How to trade with moving averages

(6) How to use point and figure trading techniques

(7) How to use the RSI indicator

(8) How to correctly use stochastics in your trading

(9) How to use the ADX indicator to capture trends

(10) How to capitalize on natural market cycles.

Plus, you will you will learn all about fibonacci retracements, MACD, Bollinger Bands and much more.

Just fill out the form and we’ll get you started right away.

Click here to begin.

Every success,
Adam Hewison
President, INO.com & Co-Creator, MarketClub

StockFinder’s Quirky MACD and MACD Histogram

macdhma_uptrendStockFinder® may be my new favorite tool, but its not without quirks. While creating custom indicators, scans and layouts for BackTesting Report subscribers, I came across its shortcomings with the MACD.   The screenshot above shows a StockFinder layout with 2 MACD of different parameter settings.  The candlesticks on the price chart are color-coded green for buy signals, red for sell signals by one MACD strategy, and blue for a different MACD strategy’s sell signals.

The two main problems with StockFinder’s built-in MACDs are:

1. When you insert a MACD or MACD Histogram, they come up with simple moving averages by default instead of the standard exponential moving averages.  You need to click on them and on the right of the edit menu, change from simple to exponential moving averages. 

2.  If you change the parameter settings, say from 12-26-9 to 19-39-9, the MACD signal line still does a 9-bar moving average of the default 12-26 MACD line.   You need to delete the signal line and recreate it as a 9-bar exponential moving average of the current MACD line.

StockFinder also takes a few extra clicks to get the MACD lines and MACD Histogram in the same pane.  They need to be added individually and take up too much space if left in separate panes.

StockFinder doesn’t come with Appel’s Histogram but I found it very easy to add as a custom indicator in StockFinder’s Real Code.   For example see the StockFinder screenshot below, which shows Appel’s Histogram in an implementation of a MACD strategy excerpt from Gerald Appel’s Technical Analysis Power Tools for Active Investors.

powertool_uptrend

In conclusion, StockFinder can do useful and powerful things but be sure to tweak the settings if you put a MACD on its charts.

MACD on BestFreeCharts

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July 13, 2009:  BestFreeCharts.com is renamed to FreeStockCharts.com and this post has been updated accordingly.

FreeStockCharts.com makes nifty charts like StockFinder.

Click here for a quick little set of instructions for plotting the MACD and MACD Histogram on FreeStockCharts.com

Overall, I found FreeStockCharts.com very straightforward to use.   It is limited to the basic charting but offers real-time data from BATS.    The interface is very similar to StockFinder, which I like, but the free tool doesn’t have the scanner, backtester, custom indicators, and industry groups which make the paid tool extremely useful.

Gerald Appel’s “Technical Analysis Power Tools for Active Investors” – a Book Review

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4.0 out of 5 stars Reveals Widespread MACD Misconceptions – Almost, April 16, 2009

Buried in this book are clues that point to widespread misconceptions about the MACD.

The clues are
1. Hints at not waiting for the MACD lines to cross to start buying
2. A calculation of MACD Histogram that is different than most, but not all, charting websites and software
3. Suggestions on circumstances to slow down and sometimes skip MACD sell signals

Experienced traders may spot the differences between Appel’s approach in this book and what is often bandied about regarding the MACD. I think it would have been even more helpful if the author had addressed the differences and pointed out any common misconceptions directly. Having done some backtesting of the MACD, I think the book needs more specific, objective details on how to anticipate MACD lines crossing and recommendations for using the MACD histogram or Appel’s histogram, as I have come to call his way of plotting it.

I reckon that reading the book years ago and thoroughly understanding the nuances of how Gerald Appel uses the MACD would have helped me, especially in 2007. Since then, I’ve seen the value of backtesting. The good news is that many sections of this book show historical test results. However, I was a little disappointed not to find backtesting results for the MACD in this book. Test data is rarely included in trading texts so it is probably a bonus to get the data that is presented in this book.

The author emphasizes synergy and gives specific instructions for using other market-timing power tools — along with the MACD and sometimes even without the MACD. In fact, the MACD is only one chapter. But MACD is why I came to the book and I suspect many other readers do the same, so that’s where I focused most of this review.

Besides the MACD, the book has instructions on key indicators of market internals and health. It also gives rules of thumb for estimating duration and extent of market moves, using chart patterns, and it covers moving average channels.

Bottom line: Worth reading to get the benefit of the experience of Gerald Appel, the man who invented the MACD and has seen a lot more than the current boom/bust cycle.

(Backtesting Blog is an Amazon Associate.)