Book Image

Python Algorithmic Trading Cookbook

By : Pushpak Dagade
Book Image

Python Algorithmic Trading Cookbook

By: Pushpak Dagade

Overview of this book

If you want to find out how you can build a solid foundation in algorithmic trading using Python, this cookbook is here to help. Starting by setting up the Python environment for trading and connectivity with brokers, you’ll then learn the important aspects of financial markets. As you progress, you’ll learn to fetch financial instruments, query and calculate various types of candles and historical data, and finally, compute and plot technical indicators. Next, you’ll learn how to place various types of orders, such as regular, bracket, and cover orders, and understand their state transitions. Later chapters will cover backtesting, paper trading, and finally real trading for the algorithmic strategies that you've created. You’ll even understand how to automate trading and find the right strategy for making effective decisions that would otherwise be impossible for human traders. By the end of this book, you’ll be able to use Python libraries to conduct key tasks in the algorithmic trading ecosystem. Note: For demonstration, we're using Zerodha, an Indian Stock Market broker. If you're not an Indian resident, you won't be able to use Zerodha and therefore will not be able to test the examples directly. However, you can take inspiration from the book and apply the concepts across your preferred stock market broker of choice.
Table of Contents (16 chapters)

Placing a regular limit order

A regular limit order is a type of order where a single order is placed at a specific price. Unlike the regular market order, this is not the market price. To place this order, a specific parameter called the limit price is needed. This parameter should satisfy the following conditions:

  • The limit price should be below the market price for a BUY order.
  • The limit price should be above the market price for a SELL order.

If these conditions are not satisfied, the order may either get placed at the market price, essentially converting it into a regular market order, or it may be rejected by the broker as an invalid order.

On placing a regular limit order, it goes through various intermediate states before finally reaching an end state (COMPLETE, CANCELLED, or REJECTED). A regular limit order could stay in the OPEN state for a while until favorable market conditions are achieved, before moving to the COMPLETE state. The following state machine diagram demonstrates...