Trading with R
R User Group - Singapore Chinmay Patil
Futures and Options Trader
Disclaimer
This is not a demonstration of how to trade!
Content
1. 2. 3. 4. Systematic Trading Process Why R for trading (research) R Tools Simple Trading System
Systematic Trading Process
Formulate hypothesis and tests to validate the hypothesis Run the tests in a research platform using available data Refine if promising Reject quickly if not promising Perform parameter robustness and walk forward optimization testing If all tests are passed, implement the strategy for production
Why R for trading (research)
Advantages Disadvantages
Flexible, powerful language Best of class tool-chain Community Open-Source Cross-platform
Not as fast as C (or other low level languages) Single-threaded Limited live deployment options
R Tools
Overview of R tool chain
xts FinancialInstruments TTR
Technical indicators Financial time series data retrieval and management package Functions for tracking trades and positions in portfolios, calculating profit-and-loss by position and portfolio, and tracking performance in a capital account Time series class Financial metadata data structure
quantmod blotter
Overview of R tool chain (contd.)
quantstrat High-level abstraction layer allowing to build and test strategies in very few lines of code PerformanceAnalytics Econometric functions for performance and risk analysis of financial instruments or portfolios. Mainly analyses series of periodic returns
Various stages of backtesting
1. Data Retrieval and Management
2. Data Evaluation
quantstrat, TTR quantstrat quantstrat
XTS, FinancialInstrument, quantmod
3. Defining Signals
4. Defining Rules
5. Backtest
quantstrat, blotter
6. Performance Analysis
PerformanceAnalytics
Simple Trading System
Data : AAPL, daily OHLC data Indicators : Two moving averages Signals : Crossing of two moving averages Rules :
Buy when fast moving average crosses over slow moving average Sell when fast moving average crosses under slow moving average
Resources
Package manuals [Link] ntstrat IRC
Server : [Link] Channel : #R-Finance
Contact
[Link]@[Link] chinmay@[Link]
Additional Slides
Data Retrieval and Management
Data source
Bloomberg, Reuters, Yahoo finance, Google finance Proprietary Databases (SQL, CSV) Clean up data (remove unrealistic prices) Convert data to proper format (XTS) XTS (time series data structure ) FinancialInstrument (Security metadata data structure) quantmod (data retrieval and storage) Indexing, mmap, RTAQ (packages for very big data)
Data preparation
Packages
Data Evaluation
Calculate Indicators
Technical Indicators Fundamental Indicators Macro Indicators
Transform Prices
For complex securities like spreads, options etc
Packages
TTR Signal extraction Any timeseries analysis packages
Defining Signals
Identify signals / patterns from various conditions met by price, indicators etc. Signals just indicate that a particular predefined condition is satisfied Packages
quantstrat
Defining Rules
Define how your strategy should handle different signals Rules decide how to act on the signals Decide trade sizes, trade risk etc. Packages
quantstrat PortfolioAnalytics LPSM
Backtest
Run your Rules over historical data to generate historical simulated trades Log generated trade Packages
blotter quantstrat
Performance Analysis
Calculate per trade performance Calculate portfolio equity performance Analyze returns distributions Check if performance metrics are within required risk/reward constraints Packages
blotter PerformanceAnalytics
