Non Random Walk.com

Trade-A-Stock Help: Trading Help

 

How Trade-A-Stock Works


Now that you have randomly selected stock, it is time to begin trading. The general idea is that you will advance forward in time, as quickly or slowly as you desire, buying and/or shorting the stock according to your analysis of the price/volume action.


The screen is composed of two parts - at the top of the screen is the control panel, while the bulk of the screen provides the user with charts to analyze.


Moving Forward: The Play/Pause Button




To avoid the trouble of having to repeatedly click the next button, you can simply press the play button one time. Once pressed, the application automatically moves forward in time, step by step, day by day, without any further input needed from the user. This can be used to move forward quickly, if there is no currently exploitable stock pattern, or you can use it to play forward until an order is executed. The play button will advance time forward until one of the following occurs:


1. You press the "Pause" button. (“Play” turns to “Pause”, once pressed)

2. You press any key on the keyboard.

3. An enter/exit order is hit

  1. 1.You resize the browser window

  2. 2.The application reaches the end of the game.


This button is particularly useful if you have set enter and exit prices for the trade. Once pressed, the button will move forward until an order is hit.



To move one step forward in time, use the next button. This will advance one step forward in time, either from the open to the close of the day, or from the close to the close (depending on how you set the preferences). You can buy or short the stock at either the open or the close price every day. Also, you can type the following keys on the keyboard to advance instead of using your mouse to click the next button:  'n', space bar, right arrow. However, this only works if the next button is in focus. (It usually is, but if for some reason it isn’t, just click the “Next” button and the keyboard will start working again.


The application default setting is to trade at both the open and the close of the day as well as animating the stock price from the open to the close. This is something you can change by going to: menu >preferences

Enter A Trade Using An Order


Choose from the list box whether you want to buy a stock or short it. Then, enter a price that, if hit, will execute your trade. Press the "Enter" button on the control panel, or the "Enter" button on the keyboard and the price level (red circle in image) is rendered on the screen. The entry price can be either above or below the current price regardless of whether you want to go long or short. If the stock price hits your order price during the day, you will enter the trade at the order price. What does long or short mean?


Buying and Shorting a Stock


To buy a stock or short a stock, simply press the buy or short button. After entering a trade, the buttons will change their text, giving you the option to exit the trade based on whether you went long or short. What does long or short mean?


The charts will show you at what price you bought the stock on the graph. And the control panel will show you the current return on your trade. As you advance forward the trade will either go against you or not and the colors on the graph help you visualize how your trade is going. If the price moves into the green shaded area, your trade is profitable; the red area indicates an unprofitable trade. To exit the trade you simply press 'sell'.


Shorting the stock works in the same way, you simply press short to enter the trade, advance forward in time, and then press the cover button to exit the trade. Using these buttons you can only enter and exit trades at the stock's open or close price.


The Order Panel


Using the buy/sell and short/cover buttons, you can only enter and exit a trade at the stock’s open or close price. However, with the order panel you can place an order to enter or exit that will be triggered at your price should the stock hit that price in the middle of the day.

Exit A Trade Using An Order


Similar to entering a trade, you can input two prices to exit a trade. The idea is that you input an exit price to reduce and further loss on the trade as well as a target exit price to exit a trade profitably (often called stop limit orders). The exit orders will be triggered if the stock price crosses the exit order price level at any point during the day's trading. Note that if you input two exit order prices and both are triggered during the day, then the application will assume that your less profitable exit price was reached first. This is an unlikely occurrence as long as the exit orders are sufficiently far apart.


To create exit orders, simply type in the desired price levels into the order panel and press either the enter key on the keyboard or the enter button in the control panel. The exit price levels will be drawn on all of the stock charts (but not the market chart) as shown in the picture. You cannot input exit prices until you've either entered a trade or input an order to enter a trade.


Pressing the "Clear" button will remove any orders from the existing order panel.


The exit prices must straddle ( be above and below ), either the current price ( if you've already entered a trade ) or the order price, if you haven't entered a trade.


Other Control Panel Information

Total Gain, Buy and Hold, Current Return


The score panel keeps track of two things, your cumulative trade performance during the exercise ("Total Gain") and the buy and hold return. Your cumulative performance is simply how much money you would have made after all trades up to that point in the exercise, captured in percentage terms. Mathematically, if you made two trades, each earning you a 5% gain, then your total gain would be 1.05 * 1.05 = 1.1025, or 10.3% (it is rounded). 


The "Buy and Hold" return is how much money you would have made (in percentage terms) if you had simply bought the stock at the beginning of the exercise and held it until the current time.


The Current Return Box


This area of the control panel shows you how you are doing on your current trade. If it is green, then you are profitable. If it is red, then you are losing money. If it is grey, then you have not entered a trade. The box includes dividends, and is rounded. The (*) that appears indicates that a dividend has been paid out and is included in the calculation for the current trade.


The Message Bar


The message bar below gives you information about the stock - particularly if there are dividends or splits coming or if the end of the exercise is approaching. Dividends are factored into your return on a trade if you are long or short the stock. Recall that those who short a stock have to  pay the dividends to their broker. The prices have already been adjusted for splits. The app only presents split information because some people consider splits to be a bullish indicator.

The Menu


To view the menu, click on the Menu Button in the Control Panel. The following describes each menu item.


Technical Indicators/Change View: Configure how the charts are laid out and any technical indicators you might want to view.


Preferences: Configure fundamental things about application, such as the ability to trade at the open or close and/or basic chart appearances, such as the use of candlesticks versus OHLC lines.


View Trades: Shows a table with the details of all trades made up to that point in the exercise.


Once Minute Tutorial: This will walk the user through a quick slide show overview of how to use the tool.


Help: Brings the user to help page for this part of the application.


Skip To end: Advance to the end of the trading exercise time period and proceed to the evaluation and review part of the application.


Start Over: This will begin a new Trade-A-Stock game. All data will be lost, including your trades and the stock data. You will be brought the beginning of the application and asked to choose a new stock.

        Control Panel
        Chart Area
       Time Bar
      Order Panel


The Charts


In each exercise, the market price/volume history and the stock's price/volume history are available to help you make trading decisions. You can view either price series on any chart, but you can only trade the stock. The market is there purely to give you insight into how the stock trades. This does invite some bias, as a student of the market might be able to recognize the year simply by looking at the chart of the market. However, that is often not the case and it is simple to hide the market if desired.

Arrange the Charts


Each chart has a couple of selection boxes above them that allow you to view the stock or market (for example the S&P500 for US stocks) over multiple different time frames. The limit is set to two years, provided there is enough data. This is because  a look-back period of more than two years allows one to see certain market patterns (the crash of 2008 is very easy to spot). This biases you if you know recent market history. Also, this site is designed to help you with short(er) term trading, and data from many years ago does not inform the next few months very well.


Note, if the amount of data to be plotted is very large and the space on the screen  is small, the chart shifts to only plotting the close of each day.


The price label tells you the precise price at either the close or open of the day. The percent gain reflects changes from the previous day's closing price.

Moving forward in time


You can move forward in time in two different ways. You can either advance from the opening trade of a day, to the close of a day, then back to the open. Or, you can advance from the close of the day to the close of the next day. To change this setting go to Menu > Preferences.

        Return on current trade
       Visualizaion of
trade

Note, the current return includes dividends in the calculation. If a dividend was paid, the ( * ) character appears after the percent sign.


Calculating a return on a short trade: The assumption on a short trade is that all of the equity you have available was committed to the trade and there was no use of margin for excessive leverage (i.e. your margin ratio is one). So, the short sale rate of return equals:


( Stock Sale Price - Dividends Paid - Stock Purchase Price ) / Stock Sale Price


There is also no margin requirement built into the code, as this software does not truly mimic full portfolio trading.  For an in-depth discussion of short selling, go here.

View Trades Panel

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