Creating an Index

Its really simple, I just look at the price in terms of the miminum
tick size or 1 cent move.

So it doesnt matter if a stock is either $1 or $20 from a big basket,
either its an tick up or tick down.
 
I have created equal weighted indexes/baskets with equal dollar weights in each. Not for any deep reason, it just seems like the simplest approach and is good enough for me. I usually work in returns, so the index return for and index of A, B, and C would be 1/3 the return on A + 1/3 return B + 1/3 return C. If I wanted a price instead of a return, I would start with a price of 100 then apply the index returns to get to a price.

The "problem" is that it doesn't stay equal weighted between rebalancing intervals. If A goes up and B goes down, A gets more weight than B in the next period. I put problem in quotes because I don't think it is much of a problem if you're just using it as an indicator. You can just rebalance to equal weights at whatever frequency you want, or you could set weight thresholds that trigger rebalancing if you think it is worth it. But if you work in returns it is not an issue, you are implicitly rebalancing at the beginning of the return interval.

Quote from WinstonTJ:

Equal weighted stock basket how? For example, if you have 10 stocks how many shares of each stock do you use to track your basket?

If you use one share per stock (just using the stock's price) then what do you do with it? For example, 10 stocks:

Stock A: $1
Stock B: $2
Stock C: $3
More...
 
Can anybody suggest a way to plot an OHLC chart of a custom index? David22 , in your prev posts you mentioned using TOS DDE and Excel to create an index but do you try to capture it every x minutes to be able to plot it in a chart format?

Amibroker and Linnsoft has addtocomposite and create custom tickers methods respectively. I've heard some traders create custom tickers in Neoticker and Tradestation. I am trying to do the same in Ninja but as a newbie still no luck.

I am able to plot the H,L,Op,Cl between two stocks in Ninja BUT ONLY AS INDICATOR LINES which means my chart has 4 separate lines .For clarity I am trying to plot the ff. in an OHLC format.
indexHi=Hi(goog) -hi (aapl)
indexLo=Lo(goog) -Lo (aapl)
indexOp=Op(goog) -Op(aapl)
indexCl=Cl(goog) -Cl (aapl)

I hope this is possible w/ NT. Suprisingly, I am even able to do this in TOS with beta or other weighting factors. I can enter the ff in the chart dialogue box of TOS and get it in an OHLC format.

(goog*2)-(aapl*5)


One would think that NT would be able to do this easily. Any advise?
 
MushinSeeker in terms of TOS DDE and Excel, I capture
and plot the data every 15 seconds, but I can vary the time capture
from seconds to minutes.

If you want to capture data using a finer resolution like
less than 5 seconds, maybe neoticker is the better choice
or some other application like ninja.

I suppose it all depends of your trading style, like scalpers using
sub second data resolution to intraday traders using 5 min charts
and minute data capturing etc.
 
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