Introduction

You may want to make the most informed decisions in a constantly changing market. One method of achieving this is by utilising historic pricing. This allows you to navigate the madness of market volatility and helps you create your trading strategy.

What is Historic Pricing?

Imagine having a road map of how a stock performed in the past and using that to make decisions. Historic pricing studies a security's past price changes, stocks, indices, or commodities listed on the BSE or NSE. By understanding how prices move and price movement patterns over days, months, or even years, you can identify trends and behaviours influencing your trading plan.

Historic pricing is not just about the numbers; it's about understanding the history and the road towards the current price for that stock. For example, you may observe that a particular company's stock consistently rises in price before the quarterly results are released or consistently declines in price during a period of market correction. These experiences will allow you to see and foresee price movement, which will allow you to make even better investment choices.

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The Importance of Historical Prices

As a trader in India, you will trade in a context where a host of aspects, from weather reports and monsoon forecasts to developments in the global economy, can have a (badly) dramatic impact on your daily trading.

Here's how:

Discover Trends: Historical price data is the perfect way to discover trends. For example, you may discover that a Nifty 50 stock improves during key festive celebrations, like Diwali. If you identify those trends, you can trade with higher precision.

Strategically Educated Decisions: You can make decisions based on solid data. Whether you are trading in the short or long term, it is pertinent to know how a stock made moves in the past during important market moments like budget announcements. This gives you a more informed approach to what opportunities may lie ahead.

Price Reports: If you conduct fundamental analysis, you can identify how a stock was valued in the past and compare it with where it is. For example, if this same stock's price-to-earnings ratio was lower in a more bullish market, this presents a potential opportunity today.

Ways to Get Historical Price Data

No need to sift through piles of old newspapers to find historical pricing. Most trading platforms and stock exchanges reasonably provide historical pricing. Here are some options to help you get started:

• Websites: Both the BSE and NSE have historical pricing for the listed securities on their websites, and often volume data. This can add depth to your analysis.

• Trading Platforms: Many trading platforms can visualise historical price data in charts. Depending on the size of the data presented in charts, it is easy to identify historical trends.

• APIs: If you know your way around technology, APIs can be used to extract historical data for analysis or programming auto trades.

Most historical price data is available for free. However, some premium analytical tools may charge for datasets with extensive details, which isn't unusual or atypical in data and analytics. Remember, despite a vast array of data, poorly sourced data may lead to insufficient data and/or bad insights.

How can historical pricing be Used Practically?

Historical prices can act as inspiration for traders. Here are three essential ways you can employ historical prices:

1. Predicting Future Moves

Where the price of a stock has been can also help in understanding where it may go in the future. For example, suppose the cost of a cement stock historically jumps after announcements of infrastructure budgets. In that case, you might look to buy the stock before an announcement from the next Union Budget.

2. Backtesting Strategies

If you want to assess or backtest a trading idea, a backtest allows you to implement your trading strategy on historical data to see how it would perform. For instance, let's say you wanted to backtest a moving average crossover strategy. You could add a stock like Reliance Industries and get back a success rate for the past five years.

3. Evaluating Valuation

Historical prices can also help to determine whether a stock is valued fairly. By comparing previous price-to-book ratios to current price-to-book ratios, you can spot undervalued hidden gems in sectors like the IT or pharma sectors when the market dips.

Key Things to Understand

To solidify your understanding of how to approach using historical prices, here are the following terms that you may need to understand:

OHLC: Open, High, Low, Close prices that reflect the cost of an asset, either daily or weekly.

Volume is the total number of shares traded: Each transaction is market interest. If a stock rallies or drops and the volume is high, it could likely sustain the move because of its momentum.

VWAP: The Volume-Weighted Average Price (VWAP) is the average price a stock trades, which is a significant factor in intraday trading decisions.

Conclusion

As a trader in India, taking advantage of historic pricing figures will allow you to safely navigate the BSE and NSE using your trading strategies by acting on them. You can discover opportunities, backtest strategies, and make informed decisions. Whether looking for blue-chip dividend stocks, mid-cap stocks, or any other type of stock, you should undoubtedly use historic pricing to establish confidence in your trading strategies.