Friday, February 21, 2014

Useful Trading Tools - Part Three: Unique Information

The first two posts in this series covered volume information and the NYSE TICK.  For our third segment, we'll take a somewhat different approach and examine not just unique data, but also unique ways of processing information.

What we know from learning research is that processing information more times and in more varied ways leads to deeper assimilation of knowledge and greater retention.  In other words, if we read something, then hear it, then discuss it, and then map it relative to other things we know, we're more likely to make productive use of the information than if we simply read it and keep it in our heads.

My favorite site for processing market-related information is the Finviz site.  Suppose I wanted to step back and examine which market themes have been dominant over the past month.  I could look at many asset classes, ETFs, and stocks to answer that question or I could look at a heat map display such as the above.  In a single display, we see major ETFs grouped by category and color-coded by performance.  Of course, during this past month, we can see how commodities have been the leaders.  With a simple click, we can change the frame of reference to the past trading day, the past week, etc.  

Their groups display provides a visualization of stock market sector strength and weakness; there are also visualizations for forex and futures.  Other productivity tools include a stock screener and a news feed that is a very effective way to keep on top of headlines from major financial media and posts from popular blogs.  All of the above is free; an elite service offers real time quotes and many more analytics.  

Now suppose that you are processing unique information in unique ways through sites such as Finviz and then using a social media platform such as StockTwits to connect to a group of trusted and respected peer traders to share and discuss the information.  Suddenly you have multiple eyes and ears on markets and multiple perspectives on the information--as well as multiple avenues for processing that information.

I have long believed that if you look at the same information as others, in the same way as others, you're likely to achieve the same returns as others.  Unique, superior returns require unique, superior ways of processing market-related information.  Leveraging distinctive sites and platforms that have exploded with the rise of social media can be an effective way of moving past the herd.

Further Reading:  Information Processing and Trading