Sunday, May 22, 2011

A solution in search of a problem

I don't believe in algorithmic trading methods though I am aware that most stocks bought and sold every day are done so because a computer decided to pull the trigger.

Be that as it may, the real reason for my foray into this world was to write a program with server-side Python which utilizes a CouchDB storage solution and an Android app which visualizes the data on a canvas. Oh yeah, and lots and lots of JSON.

I don't really have a name for these programs - I call the collection of Python scripts ZapDome. The Android app is called WebFrenzy. I've open sourced the Python stuff but like I told a startup guy this week, please don't judge me by the excellence of this code - I'm a Python noob. I'll post the WebFrenzy code after I clean it up a bit. It's a real mess right now. Perhaps most importantly, it's yielded a pretty clever (in my opinion) lightweight Java CouchDB library for Android devices specifically built for interacting with Cloudant servers called BarcaJolt. I'll blog about that later.

Anyway, my algorithm is to look for significant volume trends throughout the day and compare those intraday prices with the closing price. So I collect data at the top of the hour 10AM - 3PM EST then sweep up the closing price at 5PM EST. If the volume is >= 125% or <= 75% what SHOULD be according to it's moving volume average at that time, I flag it.

For example, if a stock is averaging 1,000,000 shares of volume a day and at noon EST it's already racked up 900,000 shares traded, that obviously meets my definition of significant volume. Let's say at noon EST, this stock's price is $2.00 and at the end of the day, it closes at $3.00. What if this happens often? That is, hours when the volume is "high", it almost always posts a profit according to it's closing price?

Honestly, I don't really care what the algorithm is. I'm never going to use this data - I'm a value investor!. But it's a fun hack and gets me experience in things I want to learn more about (Python, CouchDB, JSON, Android apps).

So here's a couple screen caps of my Android app showing the behavior of 2 stocks I've been tracking over the last week (I've only pulled a week's worth of data). Obviously you can't pull any trends out of such a small data sample. The data is on an X/Y graph (Vollume/Price). So the top right quadrant shows instances where the stock's volume was high and the stock price rose before the close. More to follow.

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