4 Data-Driven Methods to Improve Your Trading Decisions

Stocks trading can be a complex minefield to the uninitiated. The wrong decisions can literally blow you out of the water, leaving you high and dry. Fortunately, there are highly effective data-driven tools to employ. Many traders invest substantial time and effort trying desperately to decipher the ‘codex’ of the financial markets. The truth of the matter is that the complex mechanisms which govern market functionality make it fundamentally difficult to accurately gauge price performance. Oftentimes the problem is not the lack of time and effort devoted to trying to understand the financial markets; it’s bad trading habits that simply need to be changed.

As a novice day trader, or a veteran with a lackluster track record, there are techniques that can be adopted to improve your trading success. Barring elemental aspects such as understanding how to use a trading platform, they are many techniques that you can employ. As bizarre as it sounds, there are barely a handful of people who truly understand how to predict, anticipate, or forecast price movements across a broad spectrum of the market. Often, these market movers are fund managers, or heavy hitters with tremendous clout in the financial markets. Their word is gold to their followers, and their actions often generate responses through the herd mentality. In this guide, we will examine 4 ways to boost your trading decisions with data. These are tried and trusted techniques that can easily be implemented as part of your day trading regimen.

4 Data-Driven Methods to Improve Your Trading Decisions

#1 – Use Trendlines

In trading parlance, there is an expression: ‘The trend is your friend’. When you move with the trend, you effectively move with the market. If a bullish trend is underway, prices are rising, and you stand to benefit from the upswing in price movements. If a bearish trend is the order of the day, prices are dropping. Shorting stocks on futures markets, with put options is the sensible option. More specifically, market psychology is represented by trendlines. If you look at the price of a stock over a period of time, a pattern emerges.

From the far left on the timeline to the far right on the timeline, there may be an apparent trend. If prices are rising per unit time, you’re looking at an upward sloping trend line. If prices are falling from the far left on the timeline to the far right in the timeline, you will be seeing a downward sloping trend line. Trendlines are visible in short intervals, or across a longer timeframe. Either way, day traders should always factor trend lines into the equation for buying and selling decisions.

#2 – Trading Volume

There are thousands of stocks listed on any given exchange. Some of them have flat trading volumes; others have excessive trading volumes. As a day trader, you are always looking for volatility for profitability. The more volume there is, the greater the interest in the equity (stock). Trading volume serves as a powerful technical indicator in the market. It is also a great way to identify trends and patterns, or reversals thereof. A rudimentary definition of trading volume is apropos at this time: ‘The total number of shares of a security that are traded per unit time.’ Naturally, you can use trading volume to determine when you should sell a security. As trading volume slows, you should take profit.

#3 – Use Real-Time Stock Scanner Technology

One of the greatest challenges facing traders in a robust market is the sheer glut of information. Terabytes of data are exchanging hands at any given time, making it infinitely complex to understand which stocks perform best at any given time. It is impossible to scan the literature in real-time on your own, without using a real-time stock scanner such as StocksToTrade’s Oracle. This powerful stock trading platform harnesses the power of cutting-edge technology.

The Oracle system is the brainchild of professional traders and technical experts. This sophisticated algorithm scans stock markets in real time, identifying the highest volatility with the greatest profit potential. Oracle alerts traders to ‘Hot stocks to trade each morning’ by creating a watchlist of hand selected top-performing stocks. Traders receive this listing by 10 AM EST. The signals can guide traders to greater success.

#4 – Bollinger Bands & Moving Averages

Momentum indicators are especially important when trading stocks. Bollinger Bands comprise an upper band, a median band, and a lower band. The upper band represents the highest price, the median band represents the exponential moving average, and the lower band is a price floor. What is particularly interesting about these bands is that if the current price – the spot price – of the financial instrument crosses above the median band, prices will be expected to rise.

If prices cross above the upper exponential moving average band, you can expect a price reversal to take place to the downside. Why? Because it indicates that the financial instrument has been overbought. If prices cross beneath the lower Bollinger Band, traders can expect the price to reverse to the upside. Why? Because it indicates that the financial instrument has been oversold. Most of the time, you will notice that stocks tend to hover around the center line of the Bollinger Bands, indicating equilibrium.

These are important indicators to bear in mind. Moving averages represent short-term and long-term price averages for the stock. If the spot price is above the 50-day moving average, bullish momentum is in effect. If the spot price is below the 50-day moving average, bearish momentum can be expected. While technical indicators certainly do not guarantee success in trading, Bollinger Bands are one of the most respected technical indicators in the world. They are effective for highlighting short-term prices in underlying assets.


These are the most beneficial data-driven tools to use to boost your trading success. These powerful data-driven resources can enhance your success as a day trader.

FG Editorial Team
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