In the preceding example, we played the role of a trader who followed the portfolio allocation set by the treasurer. Assuming that our job is to follow the securities required by the treasurer, the profit and loss of the trader hinges on how can we profit from buying low and selling high. We took the daily pricing history of securities as the data to build our model. In the following section, we will demonstrate how to predict the trend before making buy decisions for assets.
There are two major processes—one on model development and another on model backtesting. Both processes include a total of eight steps for real-time deployment, which we will not include here. However, it is very similar to model backtesting. The following diagram illustrates the flow of the process:
Loading, converting, and storing data
In this step, we will load the data, convert...