Book Image

Hands-On Financial Trading with Python

By : Jiri Pik, Sourav Ghosh
Book Image

Hands-On Financial Trading with Python

By: Jiri Pik, Sourav Ghosh

Overview of this book

Creating an effective system to automate your trading can help you achieve two of every trader’s key goals; saving time and making money. But to devise a system that will work for you, you need guidance to show you the ropes around building a system and monitoring its performance. This is where Hands-on Financial Trading with Python can give you the advantage. This practical Python book will introduce you to Python and tell you exactly why it’s the best platform for developing trading strategies. You’ll then cover quantitative analysis using Python, and learn how to build algorithmic trading strategies with Zipline using various market data sources. Using Zipline as the backtesting library allows access to complimentary US historical daily market data until 2018. As you advance, you will gain an in-depth understanding of Python libraries such as NumPy and pandas for analyzing financial datasets, and explore Matplotlib, statsmodels, and scikit-learn libraries for advanced analytics. As you progress, you’ll pick up lots of skills like time series forecasting, covering pmdarima and Facebook Prophet. By the end of this trading book, you will be able to build predictive trading signals, adopt basic and advanced algorithmic trading strategies, and perform portfolio optimization to help you get —and stay—ahead of the markets.
Table of Contents (15 chapters)
1
Section 1: Introduction to Algorithmic Trading
3
Section 2: In-Depth Look at Python Libraries for the Analysis of Financial Datasets
9
Section 3: Algorithmic Trading in Python

Learning mathematical model-based strategies

We will now look at the various mathematical model-based strategies in the following sections.

Minimization of the portfolio volatility strategy with monthly trading

The objective of this strategy is to minimize portfolio volatility. It has been inspired by https://github.com/letianzj/QuantResearch/tree/master/backtest.

In the following example, the portfolio consists of all stocks in the Dow Jones Industrial Average index.

The key success factors of the strategy are the following:

  • The stock universe – perhaps a portfolio of global index ETFs would fare better.
  • The rolling window – we go back 200 days.
  • The frequency of trades – the following algorithm uses monthly trading – notice the construct.

The code is as follows:

%matplotlib inline
from zipline import run_algorithm 
from zipline.api import order_target_percent, symbol, set_commission, schedule_function, date_rules, time_rules...