Day Trade Futures Online

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Computers have become a necessary tool for every trader. The days of standard chart books have almost disappeared. Their static nature does not give today's sophisticated trader the flexibility necessary to make informed and researched decisions.

But what is necessary and what is just plain overkill when it comes to buying software and hardware? This greatly depends on you as a trader and the methods you will employ in your trading style. Trend followers and longer-term traders have little use for real-time quotes and sophisticated testing platforms. Day traders and short-term traders require the up-to-the-second pricing of the markets and will want to perform analysis beyond what is available for free on the Internet.

The Internet has made the world speed up and is an excellent first step for traders to explore before making their final decisions in both hardware and software. This chapter includes a list of sites that offer free charts and quotes. But before you get to this point, look at yourself as a trader and evaluate what it is you enjoy doing, as this is just as important. I know many individuals who make the ultimate jump from $80,000-a-year jobs to go out and become day traders. They follow every tick, and some love being tied to the computer all day and are learning excellent bladder control. Others find day trading too intense or difficult to master, and go back to their day jobs.

Type of Trader You Want to Be

Some self-examination is necessary before you make any final decisions about both software and hardware. Table1.1 shows the components you will need, depending on the type of trader you are.

Hardware

On the hardware side, a computer is a must necessity. With the advent of faster chips and computers that cost less than $1,000, a good computer should be well within reach of any trader. Let's face it, if the purchase of a computer is going to strap you, then you probably don't have enough money to trade with anyway. In general, the biggest and best computer you can afford is probably the right decision. Computers are getting cheaper every day and faster and faster. But software is also getting bigger and slower requiring the bigger computers. It is a never-ending vicious circle.

At the bare minimum as of the time of writing this book, a Pentium 300 with 32 megs of ram and a 4 gig hard drive should handle most tasks. If analysis software is in the picture, then a 450 or better is recommended, and pump your ram up to 64 megs. The advent of better internal memory handling in the computer makes it of greater importance to have more memory than a faster processor at this level.

I must also note that due to the lack of Macintosh software applications for technical analysis I'm leaving out their specs. If an Internet solution that is browser based is all you need, however, you could use a Macintosh. The IBM-compatible side, for now seems to have the lock on the programs we use, so no further mentions will be made of Macintosh computers.

Table 1.1 Tools necessary for trading

* Recommended but not required.

Internet Connection

The Internet is becoming a large part of how we trade the markets. Now we can get data as well as all types of research transmitted through it. The more we rely on it, the faster our connection to it must be as well as the modems that connect. When using the Internet over standard phone lines, you should have at least a 56.6k modem. I won't go into the details of what the numbers mean but in general the bigger the number, the more data can be pumped through it and at a faster rate. Some areas are now offering digital subscriber lines (DSL). These are faster connections to the Internet that require their own type of modem. This modem is available through the company that sets up the DSL service. In addition to DSL, cable modems also may be available through your local cable company. The special modem required for this service is not yet available in computer stores, but it should be supplied by your cable company.

The main point is this: Since we are using the Internet more and more in our trading, it only makes sense to get a fast, reliable connection. This is especially true if you are using the Internet as a method of data transmission. If this is the case, a regular modem and dial-up connection is on the bottom of the scale. Look into the faster and more reliable connections offered by DSL, cable modems, ISDN or for you monster users, a T1. All these connections do require installing special hardware on standard computers, so there will be additional costs.

Monitor

Don't skimp on your monitor and video card. This may seem a little weird but since you will be looking at your monitor a whole heck of a lot, try and save your eyes any additional stress. A 17-inch monitor is sufficient, but if you can afford it go for a 21-inch screen. It makes seeing the whole picture a lot easier and allows you to step back to take it all in. I like to make this analogy between art and monitors. You don't look at fine art just a few inches away. You step back to try to take in the whole picture. The same can be said for a decent sized monitor. It allows you to step back to get a better picture.

The monitor is important but the video card, the part that supplies the picture to the monitor is often overlooked. Get one that has its own memory. This allows it to process images and charts faster and clearer. Cards come pretty much standard at 2-4 megs of memory so if you can get one with eight or more you are doing just fine. Also be sure the resolutions of the video card support a wide range. This usually indicates a better quality card with the higher resolutions being desirable. Resolution is the number of pixels that can be fit on the screen, and the higher the resolution, the better the quality of the image or chart.

Just as a final note on the hardware. If all you are doing is Web browsing, then a more modest computer will suit your needs. Remember there are thousands of configurations of computers out there. If you are confused at all, find a reputable consultant who can help you with your purchase. Try not to be oversold or undersold by a salesperson who works off commissions. There are plenty of sources on the Web where you can find great consumer information, and I recommend you check them out.

End of Day or Real-Time Data

Before getting into software, it is prudent to look at data feeds. The data feed you get will often determine the software compatible with it. So before you commit to any contract with a data feed, be sure your software needs will be met.

Data feeds come in many shapes and sizes. The main distinction is between real-time data and end of day data. There are also crossbreeds of these two but we will stick to these two categories first.

Real-time feeds provide you with up-to-the-tick information. When a trade is made in the pits, it is reported to the pit reporter and entered into the exchanges system, which then broadcasts it to all the feeds. They, in turn, transmit this to you and you see the transaction on your screen. Usually it takes just a microsecond to send the data out, but it can take varying lengths of time to get to your screen, depending on the transmission method used to send the quotes to you.

Transmission Method

This is one more piece to the puzzle for you to make a decision on. Here are the different methods of transmission available: satellite, cable, FM, and Internet.

I wish there was an easy way to rank the speed of these methods but there is not. It all depends on factors too numerous to go into. But I will try and simplify it as much as possible.

The standard, for a long while, to transmit data was through satellite. Recent advances in Internet speeds and modems have made the Internet the new standard. Satellite is still the best in most cases, but it requires additional costs for equipment and is not always available in all areas. If you live in a skyscraper or a planned community, it may not even be allowed.

Cable is often a viable solution for most people. Be aware though that the data is transmitted on sidebands along with TV programs similar to what you see when you watch CNBC. The ticker on the bottom is a sideband of data being displayed. Most cable companies insert local commercials into their programming. This can cause interruptions in your feed whenever there is a commercial. I have experienced this myself on CNBC. My solution was to choose another channel that was commercial free such as QVC, AMC, or TNT. Be sure you know what channels are supported by the vendor to see if they are available on your cable system.

My only real caution is to avoid FM transmission. It is the slowest of all methods and has been phased out by almost all the vendors. The delays in this method of transmission can be up to minutes from the time of the actual quote. This method of transmission is totally unacceptable for real-time trading.

So you have decided to go real-time with your feed. We have included all the contact information for many different types of data feeds. There are some questions you are going to have to ask and some determinations you must make before you call for information on a feed. The first should be which of the preceding formats you will use to receive data based on what is available in your area. Be aware that most vendors will try and get you into a one-year contract at least. Going real-time is a big commitment in both your time and money, so it is very important to use due diligence when making this decision.

When you choose a transmission other than the Internet, there may be additional charges for equipment ranging from the satellite dish to the receiver box. Some add a separate charge for the equipment and some include it in your monthly payment.

On the subject of monthly payments, there are expenses called pass-through costs or exchange fees, that the exchanges charge for use of their real-time data. These costs are above and beyond what the data feeds charge for their services. The fees are collected by the data vendor and usually are not quoted in the cost of the feed. This is a cost that cannot be avoided and represents a large source of income for the exchanges. These exchange fees can vary from exchange to exchange as shown in the following list:

There is a way to get around exchange fees. The exchanges make a distinction between real-time and delayed. Delayed data is the same data as real-time except it is rebroadcast between 10 to 15 minutes later. The amount of the delay varies from exchange to exchange. So if you do not need up-to-the-tick data and can get away with delayed, you can save yourself a lot of money. Delayed data is fine for individuals who want to get an idea of what the market is doing during the day but who are not doing day trading.

There is another type of data vendor, the end of day providers. These are mixed in the preceding list of vendors. End of day data is sufficient for all longer term traders and even for shorter term traders looking at a one-to three-day outlook. These are considerably cheaper than delayed or real-time data and offer all the information you need. Again with the end of day providers, there are differences.

Market data comes in many different formats. The most popular end of day formats are CSI, Metastock, and Ascii. When you get a vendor, be sure you are getting the data in a format that is readable by the software application you want to use. Try to avoid a vendor that restricts the use of the data in other applications or disables the use of the data after you stop your subscription. You have paid for that data and have the right to use it any way you like as long as you stay within your End User License Agreement. This basically says that you are not going to resell the data.

Also avoid scenarios where you have to download in one format and then convert and use in another format. This additional manual step can take a lot of time and this stuff should be easy.

As a last note on data formats, avoid Ascii format if possible. This is a slow way of accessing the data and will require you to manually enter additional information about that data when you want to use it. The nice thing about the CSI and Metastock formats is that all information about the instrument you are charting is also in the file. So when you go to pull up a chart on the Treasury Bonds, it already knows that each tick is worth $31.25. This is not the case in Ascii, and it would require you to enter this information.

Many provide just end of day data for downloading. Some provide intraday data as well. This intraday data is usually provided at the end of the day and is used primarily for backtesting of strategies. Intraday data is also known as tick data. These can be very large files, as in the case of the S& P where there are tens of thousands of ticks every day. There is basically only one format of intraday data that is supported by most of the software. It is the Tick Data Inc. format. This format can be displayed by the software application but usually cannot be imported into the software's format. This is important to know, as this data cannot be appended to the data you collect from your data feed.

Software Package

A distinction must be made about real-time vendors. The most popular software out there collects data from the data feed. When ticks are sent, the servers of these applications are responsible for saving and storing this data. So think of a data vendor being like a radio station. It sends out music and you listen to it. But let's say you want to go back and listen to the song just played. The only way to do this would be to record the song from the radio. This is how most software applications work. They must collect the data all the time during the market day, or when you want to go back and look at the data again, it won't be there. So if you shut down your software during the day and then come back later, there will be no data collected and you will have gaps in your data.

Better options are now available. Now the feeds are storing the data on their servers, and when you request a chart, they send all the data to you. Commodity Quote Graphics (CQG) has been one of the best in this type of technology for years. They are well known for having the cleanest and best data and extremely fast transmission methods. However, they are not compatible with any other software applications. So they provide their own front end for viewing data and doing analysis. This can be a great solution for those who are not looking to do system development and are more concerned with clean accurate data. At the time of writing, CQG did not have a system backtester in its application, but one apparently is due out soon.

In the same category of server side data, you have eSignal as well. Just like CQG's output, the data will have no holes as eSignal sends all the data down the pipe when you request it. No local data storage is necessary. This is true of their own front end software; however, this functionality is not available for all the other software products they are compatible with. So even though the data provider has the feature, be sure to ask whether the software you choose supports it.

Genesis Financial Data not only is an end of day provider and a great source of historical daily and intraday data, but also has something called "downloadable snap quotes." This is the ability to download information right up to current time. This is not delayed: It is up-to-the-second information. The trick is you can only request the data every 10 minutes or so. The time varies, as it is set by the exchanges.

Snap quotes can be an economical way for people to get started doing some forms of day trading. If your method of day trading is looking at 15 minutes or greater bars, you can snap quotes every time a new bar is formed and make your trading decisions. You can always upgrade later to a real-time package if you feel it is necessary. I highly recommend this to traders who want to get their feet wet without the huge cost of a real-time feed.

The final consideration when choosing a data feed is what software is compatible with it. This goes for both real-time and end of day data providers. Again, you must look at yourself as a trader and decide where you want to go as a technician. All data providers will provide you with software for downloading and displaying the data. Some have more advanced charting than others and some have more advanced technical analysis. If all you want is to get quotes and see some basic charts, then there is really no need to get any additional software. The data feeds will always provide you with some form of viewing the data. If you plan on developing your own mechanical trading strategies, however, then you will have to look at applications designed for more technical analysis.

In the past, the vendors left the analysis up to software companies. So this meant you had get a front end piece of software even to view any type of chart. Now the data vendors are starting to provide more advanced software in addition to the data. This makes it a lot easier for the end user as it becomes one-stop shopping. Always check out what your data provider is giving you as software. In many cases, it is more than sufficient for the beginning trader.

I want to make a distinction here on software. There are end of day software applications that would, of course, relate to the end of day data providers. And there are real-time applications that hook up to the real-time data providers. By this time, you should know which way you are heading, either end of day or real-time.

All end of day software have charting capabilities and basic indicators. Some allow basic system testing and development and some only allow canned system testing. Reuters Metastock and Omega Research's Supercharts have been the two most popular in the end of day market. Both have proven track records among their loyal users. Both offer basic system development and indicator creation as well as a large library of standard indicators. Costs are comparable and it comes down to user preference when making a decision between these two. Supercharts may have a slight advantage with the add-on capabilities provided by their solution providers.

This can be a great benefit for those that have no intention of doing their own development. Solution providers are vendors of add-ons like systems or indicators. I'm sure you have all seen the ads in the popular magazines for systems. Well, to run these systems, you need one of Omega Research's applications. These add-ons come in all shapes and sizes, so if you know you want something on patterns or cycles or Elliot waves, there is a solution already out there for you.

TradeStation is an excellent product, and my hat goes off to Bill and Ralph Cruz for essentially revolutionizing the futures industry. The advent of their application, now in its seventh generation with TradeStation 2000i, has brought the average trader the tools that used to be only available for the institutional trader.

TradeStation allows you to develop, test, and then monitor in real time virtually any trading system you can invent. Its powerful language called Easy Language has created a cottage industry for the solution providers. With that said, let's get down to the nitty-gritty of why you should or shouldn't own an application like TradeStation.

It is all too common for us to want the biggest and the best only to find out that using it takes more time and energy than we are willing to put into it. All carpenters have tools. But because they have tools does not mean they can build a house. Many people rapidly get in way over their head because they go out and purchase all kinds of software and then realize they don't have enough money to trade with. It is wiser to start out within your means and then move up to the software that meets your needs. TradeStation is a great application, but it is a complicated one. In fact, most users only master about 20 percent of what the application can really do. It is on the higher end of the price scale, so be sure you need it before you make the purchase.

So how do you determine whether an application like TradeStation is right for you? If you understand the basics of technical analysis and are starting to formulate your own concepts about the market and want to test them to see how profitable they would be, then by all means you are ready. You are ready to start to become a system developer. This is the next step in becoming a successful trader.

On the other hand, if you are not interested in doing any development, then TradeStation type applications are overkill for your needs. Look at Supercharts or Metastock or OmniTrader. Any of these would be fine. Since they all do some basic development of indicators and systems, they can start you on your way when you decide to go down that path. Their editors for creating analysis techniques are limited in their functionality and pretty basic, but at least they provide a start. When you max out what these can do, then you know it's time to upgrade.

Another application to think about on the end of day basis is one just released from Genesis Financial Data. They have branched out from being a data provider to also being a software developer. Their new application NavSys, short for System Navigator, is filling a void out there in the middle-of-the-road price range. It allows extensive system design and testing primarily from an end of day standpoint. You should look at NavSys if you want more than what Supercharts can offer but are not interested in the additional cost and real-time capabilities of its big brother TradeStation. It is truly a system design and testing platform. It is catered to the individual with a short-term 1- 3 day outlook in mind.

Compatibility with Data Provider

We started this section by tying into the data feeds. Not only must we match the type of trading you are doing to the data feed (end of day or real-time), we also have to match the software to that feed. TradeStation, for example, supports many different real-time and end of day formats. The most popular feeds for TradeStation are Signal, Esignal, Bonneville, DTN, and PCQuote plus a few more. At the time of this writing, Omega Research had just acquired Window on Wall Street by Market Arts. This acquisition will now provide them with their own real-time feed and should make it easier for new users to have a turnkey type package. TradeStation can support all the transmission methods to suit just about anyone's needs.

Nirvana's OmniTrader and Reuters Metastock RT also support multiple feeds; just make sure you match your feed to your software. Again, these real-time applications do more extensive research and analysis than that available from the data providers.

There are virtually thousands of combinations of software, data, and computer setups. Take it one step at a time and try not to go too fast. You may be surprised to discover that not one application out there does everything you want it to do. Quite often, we find ourselves using multiple applications. This is not unlike a carpenter who has several saws. Each one serves its purpose and to finish building a house the carpenter will use all of them at one time or another. Find the software that accomplishes what you want; don't be afraid to choose software packages that do only one or two things you like. Most people have multiple applications. Each one does what it does the best, so we use the software for those features.

The following list includes Web sites with charting and basic analysis, but is in no way complete, as many sites offer these features. All you have to do is go to any search engine and put in some key words, for example, commodities, futures, charting, quotes. We have taken the time to review the sites for usability and amount of information and analysis provided. Most are lacking on analysis but can give you prices and basic charts. Some will even give you delayed quotes throughout the day and can support multiple time periods from intraday to daily. Don't forget to look at the exchange sites as well; they also offer quotes and charts.

Web Sites of Data Vendors

A-T Financial Information Inc.
www. atfi. com
212-608-3870
Real-Time/ Delayed Service
Data Feed, Terminal, Internet
Service, Pager/ Handheld
History, Charts, Analytical Data

Uses their own software. Very stock oriented. Futures available only as an add-on to the stock packages.

American Agricultural Comm. Systems Inc.
www. acres. fb. com
800-826-8145
Real-Time Service

Provides equipment. Commodities only.

BMI
www. bmiquotes. com
800-255-7374
Real-Time/ Delayed Service
Data Feed, Terminal, Internet
Service
End of Day/ Snapshot Data, Charts,
Analytical Data

Compatible with many analytical software packages.

Bloomberg Inc.
www. bloomberg. com
212-318-2000
Real-Time/ Delayed Service

Requires their own terminal and software. Not compatible with other software.

Bridge CRB
www. crbindex. com
800-621-5271
Real-Time Service
Internet Service
History, End of Day Data, Charts

CQG, Inc.
www. cqg. com
800-525-7082
Real-Time/ Delayed Service
Volume Analysis
Data Feed, Terminal
History, Charts, Analytical Data

Requires their own software. Not compatible with other software packages.

CSI
www. csidata. com
800-274-4727
End of Day Data

Format works with most software packages.

CTS Financial Publishing
www. tradeworld2000. com
561-694-0960
Delayed Service
Internet Service

Commodity Info. Services Co. (CISCO)
www. cisco-futures. com
312-922-3661
800-800-7227
CME Volume Analysis

DSC Datalink Systems Corp.
www. datalink. net
408-367-1700
Pager/ Handheld Alerts

Data Broadcasting Corporation
(eSignal )
www. dbc. com
800-367-4670
Real-Time/ Delayed Service
Internet Service
Terminal, Handheld
History, End of Day/ Snapshot Data,
Charts, Analytical Data

Own software and is compatible with many software vendors.

Data Transmissions Network
(DTN)
www. dtn. com
800-485-4000
402-255-3750 (fax)
support@ dtn. com
AOL: DTNcorp
CompuServe: 72420,2114
Real-Time/ Delayed Service

Own equipment and software. Compatible with other software vendors.

FutureLink
www. futurelinkns. com
800-553-2910
319-277-1278
Delayed Service

Own software only.

FutureSource
www. futuresource. com
800-621-2628
Real-Time Service

Powerful front end software provided. Compatible with the popular software vendors.

Genesis Financial Data Services
www. gfds. com
800-808-3282
Real-Time Service
Internet Service
History, End of Day Data
Trading Software

Provide their own front end. Data formats compatible with all the popular software vendors.

Investools, Inc.
650-482-3050
Delayed Service
Internet Service

Interquote ( Paragon Software)
www. interquote. com
414-697-7770
Real-Time/ Delayed Service

Jones Financial Network
www. pctrader. com
775-831-2200
Real-Time Service
Internet Service

LFG, LLC.
www. futuresonline. com
312-993-2239
Real-Time/ Delayed Service

Internet-based application. Quotes and order entry.

Logical Systems, Inc.
www. bigcharts. com
312-939-3022
Delayed Service
Internet Service
Internet-Based Java Applications

MOBEO, Inc.
www. docupro. com
800-828-0870 (sales)
301-951-1733 (service)
301-951-1731 (fax)
Wireless Pager Quotes and Alerts

MoneyLine Corp.
www. moneyline. com
212-966-9797
Real-Time/ Delayed Service
Internet Service
Data feed
End of Day Data, Charts, Analytical
Data

P. C. Quote, Inc.
www. pcquote. com
800-225-5657
Real-Time Service

Works with popular trading software packages.

Price Charts. com
www. pricecharts. com
800-221-4352
Browser-Based Charting, End of Day
Data

Prophet
www. prophetfinance. com
800-772-8040
Historical Data, Internet-Based
Charts

Data available in formats supported by major sof tware applications.

Quote. Com, Inc.
www. quote. com
888-786-8326
info@ quote. com
Real-Time/ Delayed Service
Internet Service
History, End of Day/ Snapshot Data,
Charts

Works with popular trading software.

www. rtquotes. com
Real-Time/ Delayed Service
Internet Service
Terminal
History, End of Day Data, Charts

Internet-based application provided. Stock oriented.

Reuters, Ltd.
www. reuters. com
312-435-8500
Real-Time Service
Handheld Service

Own software available. Works with other software as well.

Standard & Poor's ComStock
www. spcomstock. com
800-431-5019
Real-Time/ Delayed Service
Internet Service
Data feed, Terminal, LAN Solution
History, End of Day Data, Charts,
Analytical Data, News

Works with many software packages.

Telekurs USA
www. tkusa. com
888-TELEKURS
Real-Time Service
Internet Service
Data Feed, Terminal
History, End of Day Data, Charts,
Analytical Data

Telemet America, Inc.
www. taquote. com
800-368-2078
703-548-2042
703-739-0451 (fax)
Real-Time/ Delayed Service
Data Feed, Terminal, Pager/ Handheld
History, Snapshot Data, Charts,
Analytical Data

Townsend Analytics
www. taltrade. com
312-621-0141
312-621-0487 (fax)
sales@ taltrade. com
Real-Time Service

Provide their own software. Primarily stocks.

Track Data Corporation
www. tdc. com
212-943-4555
Real-Time Service
End of Day Data

Have their own software solutions and provide data in formats compatible with many of the popular software packages.

Trade Signal Corp., Ltd.
www. tradesignals. com
Ireland
353-21-876525
Real-Time/ Delayed Service
Internet Service
Internet-based charting solution.
Uses a Java application.

If you build a system that does not require data from any outside source, you may be able to survive with just the delayed charting/ quote services available for free in many places on the Web. Throw a rock in the virtual world and you will hit a site that has delayed charting and quotes. Some offer lots of studies; some are bare bones. With these services, it becomes a matter of preference. Some of the more prominent ones are discussed next.

Quote. com
www. quote. com

Although not easy to navigate, the packages available from Quote. com make this a very valuable site. Their LiveCharts. com is some of the best free market info you can find on the Net. The analytics are a little skimpy (as they are with most online data providers), so you still have to turn to a product like TradeStation to customize your indicators.

The for-fee area of Quote. com comes at a number of different levels that rival eSignal and tend to be a bit cheaper. At the maximum level (which costs $79.95 plus exchange fees for real-time data), you get live, self-updating charts displaying tick-by-tick to quarterly bars, quote sheets with one-click links and customizable columns, time and sales data, and aggregate summary data.

At the time of this writing, Quote. com was being bought by Lycos, so their awful format may change to something a bit more user friendly. In the meantime, use them if you can get used to their interface.

Tradesignals
www. tradesignals. com

This site is more a trading strategy site than a charting site, but their continuously updated, Java-driven charting application is interesting and worth taking a look at (since it is free at the time of this writing). This is the same charting application that is offered by CBOT's MarketPlex site. You can overlay a number of studies including Gann Fans and Fibonacci series, and many others. You can also choose between bar, candlestick, or closed line. You can even flip the chart around. One nice feature is that the chart scrolls horizontally for as long as a contract remains available, and you can zoom in or out as you like. This eliminates compression problems if you are trying to look at a lot of data at once.

P. C. Quote
www. pcquote. com

This quote provider also has a very clean, useful futures site with lots of resources at your fingertips.

Market Resources, Inc.
www. barchart. com

Barchart. com is a fee-based, Internet charting service. If you want to access their charts of commodities, many of the exchanges license use of barchart. com, so you can do your custom charting through their sites.

Wall Street City
www. wallstreetcity. com

This site, mainly devoted to stock traders, gives produce futures charts as well. The site is stocks-oriented, so the offerings for the futures trader are limited.

Equis
www. equis. com

This site offers all of this Reuters company's wares, but you will also find some free delayed charts.