Metastock data errors could cost you thousands of dollars
Metastock data errors are quite common, and unfortunately, most people who subscribe to cheap or free MetaStock data don’t realise the information they are getting is inaccurate.
The number 1 investment you can make is to ensure the MetaStock data you get is accurate, clean and adjusted. The alternative is going to cost you much more than you could imagine.
As mentioned on the free Metastock data page, here a selection of what a Metastock data provider needs to keep on top of:
- Delisted stocks
- Code changes
- Name changes
- Deferred settlement history merges
- Capital returns
Take a stock split for example – something very basic
Let’s say you have a $40 stock that offers a one for four stock split. This means your $40 stock is now worth $10, but you get four times as much stock.
So the net difference to you is zero. Your entire position in dollars is the same.
But with inaccurate data, your information would be shown in your charting software as having jumped from $40 to $10. As a result, there would be a massive price skew.
Considering all indicators are mathematical formula’s based on price and volume, what effect do you think that would have when seeing the chart?
Something like this:
In the chart above you will notice the price has gapped from around $60 to $6. In reality, Fortescue Metals (FMG) just had a one for ten stock split.
If you use indicators or backtest trading systems, then your results are going to be thrown way out of line. The chart below shows FMG with a two moving average cross and an ATR% (Average True Range) reading.
Your backtesting would have shown either a massive profit on this trade or a huge loss, which will completely skew your results. The way around this is to find all the dodgy bits MetaStockock data and calculate those trades yourself. An incredibly time-consuming process.
An extremely time-consuming process.
If you use volatility based stops like the ATR (Average True Range) you will notice that it took over a month for the figures to return to normal, once again skewing your trading results.
Importance of subscribing to accurate Metastock data
Now you can see first-hand the importance of accurate Metastock data before you run any type of system testing.
What other errors should I look out for?
Another example of a Metastock data error that is often overlooked is the time you get your data.
The Australian Stock Exchange has several closes in their data. Here are a few to take into account:
- The first one is at the market close
- Your next lot of data is around 5 pm once all the brokers’ orders are adjusted
- Then around 7 pm you receive the preliminary final data
- Finally, after 8-9pm you can download the fully adjusted data.
If you download your Metastock data prior to the fully adjusted data, you may have inaccurate volume or an inaccurate open, high, low or close.
The most common is volume and if you use indicators like OBV (On Balance Volume) then your results will be significantly different to what they should be.
Hopefully, you are beginning to get a clear picture of the importance of clean and accurate MetaStock data.