Staying In The Info Loop

Sydney Morning Herald

Wednesday November 4, 1998

Barbara Drury

INFORMATION is at a premium on the sharemarket. Traditionally, the people closest to the information have had the most opportunity to profit from it. By the time inform-ation travels from companies via brokers, newspapers and magazines to the general public, the smart money has moved in and out of the market.

But don't despair. Thanks to increasingly affordable and user-friendly new technology, the humble small investor need no longer be left out of the information loop.

Armchair investors and part-time traders can log onto their home computer and crunch away at the same numbers their brokers do, from the stock, commodity, futures and foreign exchange markets.

To do this, there are three or four technological requirements, and many choices to be made.

You will need a suitable computer and poss-ibly, but not necessarily, an Internet service provider, plus trading/investment software and a data vendor.

The minimum hardware requirement is an IBM-compatible 486 computer with Windows 3.1 or better, and a modem. Most PCs or notebook computers on the market today can do the job.

Choosing software is the next big decision, because there are a lot of packages on the market with various levels of sophistication and applicability to the Australian market.

The trick is to have a clear idea what you want from it. As a general rule, the more expensive the software, the greater the range of technical and analysis tools and the more room there is to customise the analysis to suit individual buy and sell criteria.

Larry Lovrencic, the editor of the Australian Technical Analysts' Association Journal, is in the process of compiling a survey of charting software in conjunction with the Sydney Futures Exchange.

He says that the first consideration when choosing software is whether you plan to analyse real-time or end-of-day data.

THE DATA

Real-time data is the same trade-by-trade price and volume information that brokers and other market professionals use, at a price beyond the budget or needs of the average investor.

It is generally supplied with the provider's own software. Major data vendors include heavyweights such as Reuters and Bloomberg and local middleweight contender Bourse Data.

As well as live market data from the Australian Stock Exchange and the Sydney Futures Exchange (SFE), Bourse Data provides company news from AAP and RWE for an additional fee. Bourse Data has a range of pricing plans to suit casual or full-time usage patterns.

For example, the cheapest subscription plan offers 30 hours to be used within 12 months for $135. For $720 you get more than 500 hours, to be used within five months.

According to Lovrencic, while futures traders probably need real-time data, end-of-day data is sufficient for most share traders and investors.

There are maybe a dozen data vendors in Australia, many of whom also distribute software. Vendors pay a royalty for the data on shares (opening, high, low and closing price and volume), market indices and futures from the ASX and the SFE.

The vendors then charge customers according to the amount of information they want and when they want it.

Pricing also depends on whether the customer takes a direct dial or Internet service. Direct dial is easier to use and you don't need to be connected to the Internet, but it is more expensive.

The stockmarket data vendor Dial & Chart offers three levels of service. The full service includes all stocks, warrants and indices for $660 a year. This is available via a dial-in line or it can be e-mailed, and includes a help line.

Then there is an Internet service available after 8.30pm for $300 a year and an after- midnight Internet service for $120 a year.

The SFE and a range of overseas stock and futures markets are also available individually or as add-ons.

While Dial & Chart specialises in data for technical analysis, a rival, Electronic Information Solutions (EIS), also provides company news. News headlines are free, but customers pay from about 15c to download each article.

EIS charges about $60 a month for the full Australian market with indices, but small investors who want to keep an eye on only a few stocks can pay a flat fee of $10 a month plus 15c a stock. For example, to keep track of 20 stocks you would pay $13 ($10 plus 20x15c) a month.

Data prices have been falling in Australia, but Lovrencic says we are still behind America, where you can buy data from all three US markets, or about 8,000 stocks, for $US18.95 ($30) a month.

THE SOFTWARE

Now that you've got all those numbers in your home computer, what do you do with them? That's where the software comes in.

It can help turn those BHP prices and volumes into a daily, weekly or monthly chart. It can overlay the BHP graph with those of the overall market or sectors of it. It can produce technical charts such as point and figure or candlestick, or it can analyse stocks with charting tools such as Gann and Fibonaci.

The more sophisticated the software, the more bells and whistles. Some even set off an alarm bell when a predetermined condition occurs.

But let's not get carried away. Lovrencic stresses that this sort of software is not to be confused with black box systems which profess to tell investors when and what to buy.

"These are a real no-no; we don't recommend any of these," he says.

According to Lovrencic, some of the more popular software packages include Ezy Chart for beginners to intermediate level, and SuperChart, Metastock and Insight Trader for beginners to advanced.

For beginners, EIS, which owns the Ezy group of products, recommends Market Suite ($145). This comes with a portfolio manager (to keep track of trading accounts, banking details, capital gains tax requirements and dividend inform-ation), charting and analysis tools.

EIS's sales manager, Bill Muller, says the program will scan the market for stocks that conform to set buy and sell criteria.

Moving up a notch, the Ezy Chart Professional Package ($595) aims to take on the top-selling US packages SuperChart and Metastock (both $645). Insight Trader ($495 for the charting, portfolio and systems modules, also available separately) is an Australian product developed by the professional share trader Bernard Chapman.

He says Insight Trader can perform both technical and fundamental analysis. The systems module allows the user to specify technical or fundamental criteria to select stocks.

Chapman says a popular search is to identify value stocks where the dividend yield is 5 per cent plus, the price-to-earnings ratio is less than 10 times and price to net asset backing is less than two times. The program then pulls out a list of stocks that satisfy these criteria.

Insight Trader, like a number of more sophisticated programs, also includes a profit testing mode. The user sets up buy and sell criteria and runs this over historical data of, say, BHP, to show how much profit would have been made if BHP shares had been traded according to those criteria over the time in question.

One advantage of Insight Trader for local investors is that Chapman runs a monthly user group in Chatswood. These free sessions allow users to ask questions and swap ideas about the software, trading techniques and the market in general.

NET ASSET BACKING

The value (per share) of assets minus liabilities.

USEFUL INTERNET SITES

* Paritech: www.paritech.com.au

* Bourse Data: www.boursedata.com.au

* Electronic Information Solutions: www.eistech.com.au

* Dial & Chart: www.dialchart.com.au