Excel is widely used by hedge funds and professional traders to manage trades, calculate P&L, compute buy and sell signals, and much more. These capabilities are available to the average trader, many of whom already use charting software to help with their trade strategies, often with limited success. Including Excel in your trading workflow process can deliver high value in terms of profitability, discipline and consistency. There are a few things you need to learn, but it is achievable with a little effort and the benefits can be very significant to your bottom line.
You should first ask yourself how you might use use Excel for trading. Will you just import prices and volume data into a spreadsheet? Do you intend to generate buy/sell signals? How about tracking positions, profits and losses in a spreadsheet? Do you have an existing trading software platform you'd like to integrate with? Would you consider building a complete Excel for trading system with VBA, formulas, price imports and other features?
Bringing price and volume data into a spreadsheet automatically is one way to implement Excel for trading. This uses DDE links to a price data database, either an internal or vendor provided database. DDE links are efficient and can capture fast moving prices (with certain limitations relevant to algorithmic trading). Importing price and volume data into Excel with web query functionality is an alternative to DDE links. This works if you want to capture a smaller volume of prices or economic data from websites like Yahoo Finance, Google Finance, etc. You can also import data into Excel using the Data from Other Sources function. This connects to SQL Server, MS Analysis Services, XML files and ODBC -- this is a good option for the technically minded.
Using Excel for trading is highly dependent on data. Importing prices and fundamental data into Excel automatically is a great first step to implement Excel for trading. In fact, not much else can be achieved until you import data, so this is a basic foundation step. There are multiple ways to do this. DDE links can be used to import data from a data vendor. Your broker's API can be used to connect to the actual prices your broker uses. Internal or vendor provided databases can be connected using SQL or web queries. How you implement the data import will have a lot to do with your strategy and the data types you want. For automated intraday trading with fast moving prices a DDE link is best. The Data from Other Sources function in Excel uses SQL Server, XML files or ODBC to connect to a database if you have one internally at your office or home. Web queries can work for end of day and fundamental quarterly type data. Economic data comes out infrequently so speed is not an issue.
You should spend some time planning your spreadsheet designs before you implement Excel for trading. A good modular design helps understand the data flows and makes testing for accuracy much easier. Being able to find what you need when you need it is critical during a trading session. Several simple spreadsheets linked together can often be better and more efficiency than a single large spreadsheet with multiple tabs. It really depends on your preference and your system resources available. As you build out your spreadsheets keep in mind that it's easier to manage small workbooks and the tend to run faster. Whether you have single or multiple workbooks, each spreadsheet should have a specific purpose. A few caveats: external links can become corrupted and slow things down so be careful with them. More than 15,000 rows of data can slow Excel down. Make sure you back things up regularly. Charts should be used sparingly for intraday use, as your charting program is probably much better at this than Excel and charts tend to bloat your files.
Hopefully these concepts will be useful in kick starting your Excel for trading.
You should first ask yourself how you might use use Excel for trading. Will you just import prices and volume data into a spreadsheet? Do you intend to generate buy/sell signals? How about tracking positions, profits and losses in a spreadsheet? Do you have an existing trading software platform you'd like to integrate with? Would you consider building a complete Excel for trading system with VBA, formulas, price imports and other features?
Bringing price and volume data into a spreadsheet automatically is one way to implement Excel for trading. This uses DDE links to a price data database, either an internal or vendor provided database. DDE links are efficient and can capture fast moving prices (with certain limitations relevant to algorithmic trading). Importing price and volume data into Excel with web query functionality is an alternative to DDE links. This works if you want to capture a smaller volume of prices or economic data from websites like Yahoo Finance, Google Finance, etc. You can also import data into Excel using the Data from Other Sources function. This connects to SQL Server, MS Analysis Services, XML files and ODBC -- this is a good option for the technically minded.
Using Excel for trading is highly dependent on data. Importing prices and fundamental data into Excel automatically is a great first step to implement Excel for trading. In fact, not much else can be achieved until you import data, so this is a basic foundation step. There are multiple ways to do this. DDE links can be used to import data from a data vendor. Your broker's API can be used to connect to the actual prices your broker uses. Internal or vendor provided databases can be connected using SQL or web queries. How you implement the data import will have a lot to do with your strategy and the data types you want. For automated intraday trading with fast moving prices a DDE link is best. The Data from Other Sources function in Excel uses SQL Server, XML files or ODBC to connect to a database if you have one internally at your office or home. Web queries can work for end of day and fundamental quarterly type data. Economic data comes out infrequently so speed is not an issue.
You should spend some time planning your spreadsheet designs before you implement Excel for trading. A good modular design helps understand the data flows and makes testing for accuracy much easier. Being able to find what you need when you need it is critical during a trading session. Several simple spreadsheets linked together can often be better and more efficiency than a single large spreadsheet with multiple tabs. It really depends on your preference and your system resources available. As you build out your spreadsheets keep in mind that it's easier to manage small workbooks and the tend to run faster. Whether you have single or multiple workbooks, each spreadsheet should have a specific purpose. A few caveats: external links can become corrupted and slow things down so be careful with them. More than 15,000 rows of data can slow Excel down. Make sure you back things up regularly. Charts should be used sparingly for intraday use, as your charting program is probably much better at this than Excel and charts tend to bloat your files.
Hopefully these concepts will be useful in kick starting your Excel for trading.
About the Author:
Using Excel for trading involves selecting and applying the right techniques and tools. Find out more here.
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