Capital management Kelly criterion in binomial setting Assume a gambler is playing a coin-tossing game against an infinitely rich bank or casino. Assume further that the probability for heads is some value p for which the following holds: Probability for tails is defined by the following: The gambler can place bets b>0 of arbitrary size,…
Install the Python wrapper package Open a FAXM Demo Account Create a unique API token Connect to the API The configuration file Retrieving data Retrieving tick data The available symbols Retrieves one week’s worth of tick data for a single symbol Pick a subset of the data and implement typical financial analytics tasks Retrieving candles…
The Oanda API The configparser module is used to manage account credentials. Filename: pyalgo.cfg To access the API via Python, it is recommended to use the Python wrapper package tpqoa. Retrieving Historical Data Looking up instruments available for trading Backtesting a momentum strategy on minute bars Implement the vectorised backtesting The derivation and plotting of…
ZeroMQ is a lightweight, fast, and scalable socket programming library. ZeroMQ supports different patterns for socket communication. One of those patterns is the so-called publisher-subscriber (PUB-SUB) pattern where a single socket publishes data and multiple sockets simultaneously retrieve the data. Running a Simple Tick Data Server Euler discretisation of geometric Brownian motion S is the…
Potential shortcomings of the approach are the following: Look-ahead bias Vectorised backtesting is based on the complete data set available and does not take into account that new data arrives incrementally. Simplification For example, fixed transaction costs cannot be modelled by vectorisation, which is mainly based on relative returns. Also, fixed amounts per trade or…
Using Linear Regression for Market Movement Prediction Using logistic regression to predict market direction Without considering transaction costs Consider the same strategy applied to the GDX ETF, for which an out-of-sample outperformance (over the year 2018) Taking transaction costs into account Using deep learning for market movement prediction The simple classification problem revisited “MLP” stands…
Simple moving average (SMA) based strategies For buy and sell signal generation is already decades old. Momentum strategies Based on the hypothesis that recent performance will persist for some additional time. Mean-reversion strategies Stock prices or prices of other financial instruments tend to revert to some mean level or to some trend level when they…
The Data Set Suppose that we have file, AAPL.csv in a data folder. Reading from a CSV File with Python Using a csv.DictReader iterator object instead of the standard csv.reader object. Calculate the mean of the Apple closing stock Reading from a CSV File with pandas Use pandas to work with the Apple stock price…
Any algorithmic trading strategy should entail the following: It should be a model based on an underlying market theory since only then can you find its predictive power. Fitting a model to data with great backtesting results is simple, but usually does not provide sound predictions. It should be as simple as possible – the…
Zipline and PyFolio abstract away the complexities of the backtesting and performance/risk analysis aspects of algorithmic trading strategies. Backtesting should include all relevant factors, such as slippage and trading costs. Zipline is one of the most advanced open source Python libraries for algorithmic trading backtesting engines. PyFolio is an open-source Python performance and risk analysis…