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by Finage at July 18, 2023 5 MIN READ
Forex trading is volatile, something that any veteran or even newbie trader in this sphere is well aware of. Therefore, many traders go far and beyond to create and employ profitable strategies. A great trading strategy will without a doubt increase your chances of profitability, regardless of the sometimes shaky stage of the markets. You can also get into the development of more complex trading strategies with Python that involve acquiring a grasp of key financial libraries and you can even create your currency converter page with Flask.
With this in mind, let us look at creating a trading strategy in Python and why it increases your trading prowess. After getting a better grasp of Pythis as a smooth solution, you can further proceed to master its use in trading. So let’s look at how you can generate effective strategies that enable you to increase the chances of profit whenever you trade!
- Python benefits for the niche
- Creating complex strategies in Python
- Gather all the important libraries
- Make the financial data class for the algorithm
- Strategy class
- Adding a class object and performing a back-test
- Make the tear sheet
- Final thoughts
Before we proceed further, it’s important to briefly highlight the importance of Python in strategy creation. Understanding its role and various features can give any trader more insight to develop even more unique strategies that eventually lead to more profits. This uptrend has continued to attract more traders and as of 2023, there are 10 million traders today.
Here are some of the reasons why Python would be your go-to:
- Python is valued for its simplicity (especially among beginners)
- Great tool for data analysis and presentation
- Provides a streamlined data integration with numerous trading sites
- It is free to use and provides room for modification
- Enables programmers to improve software quality whenever convenient
To get a proper solution, you have different options for starting your project with Python, depending on your requirements and needs. For example, you can gather historical financial data and make data analyses to identify patterns and trends and get quick financial results. Once equipped with insights, you can proceed to code trading algorithms and strategies using Python. You can use and add historical data, providing a simulated environment to evaluate the strategies' performance. You can optimize the strategies based on the outcomes of the backtesting process.
Interestingly enough, the current value of trading markets is expected to continue rising as well as its digital solutions. The global exchange services market is projected to increase from $6,7 billion to $7,5 billion in 2023. This upward trajectory indicates a compound annual growth rate (CAGR) of 10.8%. It also influences the trading market and trading algorithm development that can vary from one strategy and approach to another. While some traders use one strategy for various stock symbols, others prefer the creation of unique algorithms for each stock symbol they work with.
We will primarily focus on the former. In this instance, you will understand how a unique strategy will be implemented to any stock options, at any particular time and how you can further improve your optimization techniques. The following steps will guide you through the process:
Your initial move will be to download all the important libraries. Any library on Python can easily be manually installed in a single step by using this command python3 <FILE_NAME>.py install. Programmers can alternatively use the pip command (s the above) to uninstall files if necessary.
Transferring data from one system or program is vital for effective trading to take place. This movement of data can only be facilitated by the creation of a Python data class, which will play the role of a storage point for all the financial data your algorithm will require to function.
Each data class usually contains the following details:
- Identification Symbol: each class is assigned a specific symbol that serves as a unique identifier.
- End-date Parameter: an end-date parameter is included, establishing the conclusion point for the data and providing a temporal boundary.
- Specific Period (in days): The class specification includes a defined period, usually measured in days, the systems have to continuously download financial data.
The financial data class will further take part in the function of all the strategy classes created afterward. It serves as a main component, providing essential data that forms the basis for the development.
All the algorithms used in your trading practices will share a strategy class. In this case, we will look at a Bollinger band-based strategy). This Strategy class is designed to perform the following tasks:
- Create an indicator to visualize specific data that will run through the system
- Perform the first back-test to assess the initial data parameters in our algorithm
- Providing necessary optimization, which through various values detects the ranges that provide the best outcomes
- Analysis of the optimized strategy to detect any room for further improvement
After the creation of a class, you can quickly add an object by using the class constructor. As a result, you will have a defined object for the trading strategy you are creating. This function provided further optimization by going through more data to further refine the strategy. Eventually, all the collected values will be represented on a graph that shows the best-performing parameters in the dataset.
Finally, you can create a tear sheet that shows all important information of the best-performing parameter. All backtest data is included here to help you highlight vital values if you need to share them with another trader.
Summing up, Python-based trading solutions can also come equipped with historical charts, fundamentals, and real-time prices. It is trading necessitates that are used with many other tools. Accomplished traders rely on trading apps, widgets, and advanced tools, offering versatile diverse solutions.
Trading strategies are getting more refined with each year and this trend will continue. Coming up with newer strategies is an effective way of remaining competitive. As highlighted above, the value of trading markets is going up.
With the many participants in the race, having a well-planned and executed trading strategy gives you an upper hand. We've looked at how using Python can guide you to better trading as you create more complex and effective strategies. Having a collective of useful parameters and tools to monitor progress creates room for better results.
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