Robinhood and Quantopian: Making the stock market your bitch.

By Kyle Perkins

WARNING: This article is no longer relevant, due to Quantopian ending this service suddenly, with only a month’s warning to its user base.

With most indie authors, I would say it’s safe to assume that writing is not their sole income. If anything, any income made from writing probably goes into either more advertising and promotion, or is used as spending money each month. Of course, advertising is a good investment(sometimes), and so is putting the money into a high yield savings account, but what if there was a better way?

Well, with Robinhood, you can trade stocks for free. To most people, the stock market is a scary prospect, and is no better than gambling at a casino. The truth is, the stock market can be an educated investment. For a very long time, you needed a stock broker, or online stock broker, and they would charge $7+ for every single trade, and you needed a minimum balance to sign on with them. A minimum balance that was way too steep for the vast majority of indie authors($2500-$10,000 area). Robinhood takes that minimum balance away, along with the cost of trading, making the stock market within our reach. The best part is, they put it in a sweet app that makes the whole experience familiar and very easy to navigate.

iPhone: Click here to download.

Android: Click here to download.

The sign up process is easy, and it links your bank account directly to the app. So, instead of tossing away $8 on a Starbucks coffee, you can toss that spare change into owning your small portion of the company.

Trading is super easy.

 

The way Robinhood used to be set up, it would take three days to deposit funds, or use the funds for trades after depositing. It was a huge hiccup that caused missed opportunities. Meaning you could only trade like once a week realistically. However, since then, they have created Robinhood Instant that makes your money available for trade the instant you deposit it, or sell off a stock. This means you can trade every single day. So, when you start the app, make sure you turn on robinhood instant when it prompts you to, or gives you the option. Also, make sure pattern day trading protection is on. I believe it is by default, but go into settings and verify. This will cause the app to stop you from making a trade that could label you a pattern day trader.

Okay, so you have signed up for the app, but you don’t have time to sit and research stocks all day(because you’re busy writing, right?). This is where Quantopian comes in. Using Quantopian, you can link your Robinhood app to a trading algorithm that will do the work for you, turning your spare change into profits. Most high yield savings accounts will do about 3% interest paid back to you over the course of a year(and those are the better ones). Using an algorithm that takes human emotion and error out of the equation, you can make far more than 3%. So, you’re just tossing $10-50 bucks a week into the app, and your algorithm is doing all of the work for you.

This is a great video that shows you how to run back tests with the algorithms, connect Robinhood to Quantopian, and getting started with trading.

So, now that you have the hang of that, you can start trading. Problem is, you still need to pick stocks and plug in an algorithm.

We’ll start by going to your Quantopian account and clicking here.

Which will bring you to the screen you’re looking at. Next, we will click the “New Algorithm,” button.

Which will bring up this option to name your algorithm. If you’re more creative than I am, feel free to use a name other than “derp.”

Once you’ve named it, it will bring up this screen. It will look like Chinese to you, unless you’re Chinese. Then it will look like English. Whatever. Anyway, highlight everything in the black area and delete it.

Once the black area is blank, I have something for you to copy and paste into the black area.

Download this algorithm by clicking on it. Then open it, copy everything, then paste it in its entirety into the black section above. (I used the best of a few algorithms and combined them to make an awesome one).

Feel free to change the preselected stocks by simply finding the company’s stock symbol on google that you’d like to trade, and input it where the algorithm tells you to.

If you want to add more stocks, just copy the symbol(‘whateveryourstocksymbolis’), and add it to the list. You can put as many as you’d like, but the last on the list must end as symbol(‘whateveryourlaststocksymbolis’)]

If you need help looking up stock symbols, it’s pretty easy. Let’s say we want to find starbucks’ stock symbol. Type into google “starbucks stock” which will bring up this. The symbol is circled in red. That’s what you’d put where it asks for the symbol.

Okay, so you have all of your stock picks, and you’ve researched on Forbes or Yahoo Finance etc about how well the stock is projected to do for the year. Cool. Your algo is ready to go. Now we need to run a full back test.

I like to set the timeline to about five years, so the test is quick. Then put in about a $10,000(this is mock money, it’s only a test to see how your money would have done if the algo had been calling the shots for you during that time period). Then just hit run full backtest.

Now, depending on the stocks you chose, your outcome may look different than mine. I have about twenty one stocks(I don’t use any of the stocks in the picture), and I tested them using my algo for one year. These are the returns if my algo had been calling the shots for me.

Now, if you have a keen eye, or you’re some kind of math wizard, you will notice that 78.5% returns over the course of a year is significantly higher than even the best high yield savings account returns.

Next, you’ll just want to hit the “live trade algorithm button,” and connect to your robinhood account that you set up above(like in the youtube video). Once it’s connected and you’re live trading, you can watch the app work its magic right from your phone.

It’s a ton of fun to watch the money come in, and now you’ve evened the playing field. You don’t need to work on Wall Street or be some financial genius. The free trades and algorithm will do all of the legwork. All you have to do is sit back and rake it in.

If you want to watch how your algo is doing, either open the Robinhood app on your phone, or click here on your live trading algo in Quantopian.

Then you can watch it on your PC or laptop.

Just toss in a little spare change when you have it into the robinhood app on your phone.

…and that’s it. Now you’re algo trading! Enjoy the extra cash.

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