Trading Systems with Weather Data

Types of Weather Data for Trading Strategies

Build Alpha now contains tons of built-in weather signals that all update daily. No need to connect to a weather API or collect weather conditions yourself. Here is the weather data included in this first release.

Temperature Data

Raw Fahrenheit temperature data is useful, but comparing today’s temperature to the previous ten years’ worth of data to establish a baseline and better spot anomalies is wiser. Build Alpha also smooths the data so we are not just comparing May 6th to all previous May 6ths, but to the dates around May 6th ±10 days.

Precipitation Data

Precipitation can have a direct impact on agricultural yields. Too much and planting season can be delayed. Too little and crops become stressed.

Precipitation data can also lend clues into port congestion, cost changes to waterway transportation and even infrastructure risk, as mining or drilling operations can be paused due to washed-out roads in remote areas.

Behavioral finance may also be interested in rainfall and precipitation data. Does an overly wet season impact consumer spending? Does it force more energy demand as we stay in our homes? Can we make more informed trading decisions knowing how often it rained on Wall Street? Does weather affect investor mood?

Heating Degree Days and Cooling Degree Days

The energy industry has created Heating Degree Days (HDD) and Cooling Degree Days (CDD) to quantify heating and cooling fuel demand. Build Alpha has included both of these as well as a percentile rank for each.

Heating Degree Days measures how “cold” a day was relative to 65 °F and thus how much heating a home or business likely required.

Cooling Degree Days measures how “hot” a day was relative to 65 °F and correlates to the air-conditioning load.

Historical Weather Data Locations

The next step was determining specific locations to sample weather data from to derive actionable insights. Build Alpha’s vast network of traders helped inform these selections.

Major Cities

Build Alpha pulls data from a handful of major cities — each chosen for proximity to key trading floors, population centers, and energy infrastructure:

Major U.S. cities sampled for weather data in Build Alpha.

Agricultural Zones

Build Alpha also has weather data for six agricultural zones critical to crop production and commodity pricing:

U.S. agricultural zones used for weather-based commodity trading signals.

PADD Regions for Energy Trading

Finally, Build Alpha has weather data for the Petroleum Administration for Defense Districts (PADDs) determined by the U.S. Energy Information Administration (EIA). These regions are the standard geographic divisions used for tracking petroleum supply and demand across the United States.

Petroleum Administration for Defense Districts (PADDs) via the U.S. EIA.

Build Alpha Trading Strategy Using Weather Data

Often traders rely on market volatility, mistakes by other market participants, and an ability to manage risk to outperform. However, many system traders fail because their strategies do not have enough context regarding market regime or the current trading environment.

Adding context with non-price-based data is often a great way to improve strategy stability. This has been one of the greatest learnings in my early career — and as evidenced above by Citadel and others — and an incredible advantage of Build Alpha.

Here is a simple trading system with weather data on Corn Futures. It holds for one day and uses a volatility-based sizing method. It has a -0.02 correlation to S&P 500 buy and hold (correlation uses negative days and drawdowns only). These weather strategies can be a nice complement to an equities portfolio when the latter takes occasional significant losses.

Corn Futures weather-based strategy in Build Alpha: 1-day hold, volatility-based sizing, -0.02 correlation to S&P 500.

Can Weather-Based Trading Strategies Be Automated?

Yes. Build Alpha can generate fully automate-able code for any strategy created. This generated code accesses updated weather data — and any other price and non-price-based data Build Alpha offers — in real-time. You simply select a strategy, hit the generate code button, and copy and paste it into your platform.

Build Alpha exports fully automated code for all major trading platforms.

Create Your Own Weather Signals

Build Alpha also has a custom indicator editor (no code) with access to all this data so you can create and add any signal to the Build Alpha signal list with ease. The BA strategy engine can combine built-in and custom-made signals with various money management techniques, stop loss levels, position sizing methods, technical filters, and more.

The no-code editor can access weather events, market volatility measures, math functions, technical indicators, and more to create your own weather signals. For instance, you could sum HDD over the past N days to build a cumulative energy demand indicator.

You can also extend Build Alpha with Python and add any machine learning or custom signal you may already have.

Future Ideas for Build Alpha Weather Signals

Future development around weather-based signals could include extreme weather events, advanced climate models, weather forecasts vs. weather experienced, cloud cover data, solar power generation data, energy supply correlations to long-term weather forecasts, seasonal weather changes, and more.

Combining trading systems with weather data and Commitment of Traders Report data (and other non-price-based data) has been a ton of fun lately. I strongly recommend playing around with that! It is almost like the big players in the COT report are… well… looking at weather data…

I am excited to continue adding to Build Alpha’s historical weather database. If you have suggestions, improvements or additions please feel free to share! That is what makes the Build Alpha community so great and half the reason I do this.

Thanks for reading,
David

Updated March 2026.