Quantitative Trading Strategies in R Part 3 of 3

Computational Finance and Risk Management
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Quantitative Trading Strategies in R

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Part 3 of 3
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Guy Yollin
Principal Consultant, r-programming.org Visiting Lecturer, University of Washington
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Guy Yollin (Copyright
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Outline
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MACD example MACD example extended to multiple assets

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Optimizing the MACD trading system RSI example

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Bollinger band example Summary

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Lecture references
mm 40 60 100 TradeAnalytics project page on R-forge: 80 http://r-forge.r-project.org/projects/blotter/ documents and demos for: 40
blotter package quantstrat package
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R-SIG-FINANCE: https://stat.ethz.ch/mailman/listinfo/r-sig-finance
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Kent Russells Timely Portfolio blog: http://timelyportfolio.blogspot.com/

6-part quantstrat example 80
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Quantstrat demos
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name='sigCrossover' name='sigThreshold' ordertype='market' ordertype='stoplimit' type='enter' 40 type='exit' type='risk' orderside='long' orderside='short' applyStrategy parameters index.class='Date' 60 index.class='POSIXt' multiasset multicurrency data adjusted updates Account
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faber Y N Y N Y Y N Y N N N Y Y N N N
60 maCross Y N Y N Y Y N Y N N Y N N N Y N
bbands 80 Y N Y N Y Y N N N Y Y N N N N N
rsi N Y Y N Y Y N Y Y Y Y N Y N N N
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N Y Y Y Y Y Y Y N Y Y N N N N N
120 faberMC Y N Y N Y Y N Y N N N N Y Y N N
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demos are located in /R-2.13.1/library/quantstrat/demo

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Outline
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MACD (Moving Average Convergence-Divergence)

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Trend-following momentum indicator Published by Gerald Appel in the late 1970

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MACD Calculation
MACD = 12-day EMA - 26-day EMA MACD Signal Line = 9-day EMA of MACD MACD histogram = MACD - Signal Line 60
Interpretation
Buy/Sell when MACD Signal Line crosses 0 80
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MACD system in TradeStation

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MACD code in EasyLanguage

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EasyLanguage code
inputs : F a s t L e n g t h ( 12 ) , S l o w L e n g t h ( 26 ) , MACDLength ( 9 ) ; v a r i a b l e s : MyMACD( 0 ) , MACDSig ( 0 ) ;
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MyMACD = MACD( C l o s e , F a s t L e n g t h , S l o w L e n g t h ) ; MACDSig = XAverage ( MyMACD, MACDLength ) ; i f MACDSig c r o s s e s a b o v e 0 t h e n Buy ( MacdLE ) n e x t b a r a t m a r k e t ;
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i f MACDSig c r o s s e s b e l o w 0 t h e n S e l l ( MacdLX ) n e x t b a r a t m a r k e t ;
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MACD indicator from TTR

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Initialize currency and trading instruments

Initialization Define strategy
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Initialize currency and instruments, and load historic data
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Initialize portfolio, account, orders, strategy
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Bar-by-bar processing
Update
Reporting
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Generate performance reports and graphs
Add indicators, signals, and rules
Apply strategy to portfolio
Update portfolio, account, equity
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R Code:
> > > > > > > > > library(quantstrat) # inz currency and stocks dummy <- currency('USD') stock.str = c("XLF") 60 for(symbol in stock.str) stock(symbol, currency="USD",multiplier=1) # download stocks start.data <- as.Date("1998-12-22") end.data <- as.Date("2011-08-09") initDate80 start.data-1 <-
> for(symbol in stock.str) getSymbols(symbol,from=start.data,to=end.data,adjust=T)

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Initialize portfolio, account, and orders object

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R Code:
> > > > > > # inz portfolio, account, orders, strategy strat.name <- "MACD" 60 initEq=1000000 trade.percent = 0.05 dummy <- initPortf(name=strat.name,symbols=stock.str, initDate=initDate) dummy <- initAcct(name=strat.name,portfolios=strat.name, initDate=initDate, initEq=initEq) > initOrders(portfolio=strat.name,initDate=initDate) 80 > strat <- strategy(strat.name)
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The add.signals function

quantstrat supports the following signal types: sigCrossover crossover signal (gt, lt, eq, gte, 100 lte ) mm 40 60 80 sigComparison comparison signal (gt, lt, eq, gte ) , lte sigThreshold threshold signal (gt, lt, eq, gte, ) lte sigPeak peak/valley signals (peak, bottom) 40 sigFormula signal calculated from a formula
R Code: The add.signals function
> args(add.signal) function (strategy, name, arguments, parameters = NULL, label = NULL, 60 ..., enabled = TRUE, indexnum = NULL, store = FALSE) NULL
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Main arguments: strategy 80 strategy object name name of the signal (one of the 5 supported signals) arguments arguments to be passed to the indicator function
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The sigThreshold function

The sigThreshold function generates a threshold signal
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> args(sigThreshold) function (label, data = mktdata, column, threshold = 0, relationship = c("gt", "lt", "eq", "gte", "lte"), cross = FALSE) 40 NULL
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R Code: The sigThreshold function
Main arguments: label text label to apply to the output 60 data data to apply comparison column column name to apply comparison threshold numeric threshold to compare relationship relationship to test (gt, lt, eq, gte, ) lte 80 cross if TRUE, then signal will be TRUE only for the rst observation to cross the threshold
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Dene indicators and signals

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R Code:
> # indicators: > strat <- add.indicator(strategy = strat, name = "MACD", 60 arguments = list(x=quote(Cl(mktdata))) ) > # signals: > strat <- add.signal(strategy = strat, name="sigThreshold", arguments = list(column="signal",relationship="gt",threshold=0,cross=TRUE), label="signal.gt.zero") > strat <- add.signal(strategy = strat,name="sigThreshold", 80 arguments = list(column="signal",relationship="lt",threshold=0,cross=TRUE), label="signal.lt.zero")
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Dene order sizing function

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R Code:
> osPercentEquity <- function (timestamp,orderqty,portfolio,symbol,ruletype,...) { tempPortfolio <- getPortfolio(portfolio) dummy <- updatePortf(Portfolio=portfolio, 60 Dates=paste('::',as.Date(timestamp),sep='')) trading.pl <- sum(getPortfolio(portfolio)$summary$Net.Trading.PL) assign(paste("portfolio.",portfolio,sep=""),tempPortfolio,pos=.blotter) total.equity <- initEq+trading.pl tradeSize <- total.equity * trade.percent ClosePrice <- as.numeric(Cl(mktdata[timestamp,])) 80 orderqty <- sign(orderqty)*round(tradeSize/ClosePrice) return(orderqty) }
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Dene entry and exit rules

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R Code:
> # rules: > strat <-60 add.rule(strategy = strat,name='ruleSignal', arguments = list(sigcol="signal.gt.zero",sigval=TRUE, orderqty=100, ordertype='market', orderside='long', osFUN='osPercentEquity'),type='enter') > strat <- add.rule(strategy = strat,name='ruleSignal', arguments = list(sigcol="signal.lt.zero",sigval=TRUE, orderqty='all', ordertype='market', orderside='long'),type='exit')
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Applying the strategy to a portfolio

Define strategy
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Update
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Reporting
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R Code:
> > > > > > > # parameters: fastMA =60 12 slowMA = 26 signalMA = 9 maType="EMA" # apply strategy out<-try(applyStrategy(strategy=strat, portfolios=strat.name, parameters=list(nFast=fastMA, nSlow=slowMA, nSig=signalMA,maType=maType), 80 verbose=F))
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Call updatePortf to update portfolio P&L

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R Code:
> dummy <- updatePortf(Portfolio=strat.name, Dates=paste('::',as.Date(Sys.time()),sep='')) 60 > if(sum(duplicated(index(getPortfolio(strat.name)$summary)))>0) { tempPortfolio <- getPortfolio(strat.name) tempPortfolio$summary <- as.xts(aggregate(x=tempPortfolio$summary, by=index(tempPortfolio$summary), FUN=sum)) assign(paste("portfolio.",strat.name,sep=""),tempPortfolio,pos=.blotter) 80 warning("duplicates removed after update") }
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Chart MACD system performance for XLF

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R Code:
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> source("chart_Posn.R") > chart_Posn(Portfolio=strat.name,Symbol="XLF") > plot(add_MACD())
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MACD system performance for XLF

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Outline
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Quantstrat/Blotter portfolios with multiple assets

While most of the quantstrat demos use a single asset, the real power of the architecture is that it supports multiple assets To use a multiple-asset portfolio, simply supply a symbol list when calling initPortf 40 All functionality should simply work with the entire portfolio of assets
applying a strategy via applyStrategy will generate transactions for all assets according to the dene trading rules 60 calculating portfolio P&L via updatePortf will accumulate the P&L for all assets mm 40 60 80 100 120
Due to the additional calculations required, working with multi-asset portfolios can be time consuming 80
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Initialization Define strategy Bar-by-bar processing Update Reporting
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R Code:
> > > > > > > > > >
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# clear out old portfolios and orders try(rm(list=ls(pos=.blotter),pos=.blotter),silent=TRUE) try(rm(list=ls(pos=.strategy),pos=.strategy),silent=TRUE) # inz currency and stocks 60 stock.str = c("XLF", "XLP", "XLE", "XLY", "XLV", "XLI", "XLB", "XLK", "XLU") for(symbol in stock.str) stock(symbol, currency="USD",multiplier=1) # download stocks start.data <- as.Date("1998-12-22") end.data <- as.Date("2011-08-09") initDate80 start.data-1 <-
> for(symbol in stock.str) getSymbols(symbol,from=start.data,to=end.data,adjust=T)

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Define strategy
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Reporting
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R Code:
> > > > > > # inz portfolio, account, orders, strategy strat.name <- "MACD" 60 initEq=1000000 trade.percent = 0.05 dummy <- initPortf(name=strat.name,symbols=stock.str, initDate=initDate) dummy <- initAcct(name=strat.name,portfolios=strat.name, initDate=initDate, initEq=initEq) > initOrders(portfolio=strat.name,initDate=initDate) 80 > strat <- strategy(strat.name)
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The blotter_portfolio object

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blotter_portfolio 60 myPortfolio --------------------
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symbols -------------------symbols -------------------symbols list list -------------------list
summary -------------------portfolio_summary xts
txn -------------------transactions xts
posPL -------------------posPL xts
posPL.USD -------------------posPL xts
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Txn.Qty Txn.Price Txn.Value Txn.Avg.Cost Pos.Qty Pos.Avg.Cost Gross.Txn.Realized.PL Txn.Fees Net.Txn.Realized.PL Con.Mult Pos.Qty Con.Mult Ccy.Mult Pos.Value Pos.Avg.Cost Txn.Value Period.Realized.PL Period.Unrealized.PL Gross.Trading.PL Txn.Fees Net.Trading.PL
Long.Value Short.Value Net.Value Gross.Value Period.Realized.PL Period.Unrealized.PL Gross.Trading.PL Txn.Fees Net.Trading.PL
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Symbols in the botter_portfolio object

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R Code:
> macdPortfolio <- getPortfolio(strat.name) > names(macdPortfolio)
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[1] "symbols" "summary" > length(macdPortfolio$symbols) [1] 9
60 > names(macdPortfolio$symbols)
[1] "XLF" "XLP" "XLE" "XLY" "XLV" "XLI" "XLB" "XLK" "XLU"
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Initialization mm
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R Code:
> # indicators: > strat <- add.indicator(strategy = strat, name = "MACD", 60 arguments = list(x=quote(Cl(mktdata))) ) > # signals: > strat <- add.signal(strategy = strat, name="sigThreshold", arguments = list(column="signal",relationship="gt",threshold=0,cross=TRUE), label="signal.gt.zero") > strat <- add.signal(strategy = strat,name="sigThreshold", 80 arguments = list(column="signal",relationship="lt",threshold=0,cross=TRUE), label="signal.lt.zero")
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Dene order sizing function

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Update
Reporting
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R Code:
> osPercentEquity <- function (timestamp,orderqty,portfolio,symbol,ruletype,...) { tempPortfolio <- getPortfolio(portfolio) dummy <- updatePortf(Portfolio=portfolio, 60 Dates=paste('::',as.Date(timestamp),sep='')) trading.pl <- sum(getPortfolio(portfolio)$summary$Net.Trading.PL) assign(paste("portfolio.",portfolio,sep=""),tempPortfolio,pos=.blotter) total.equity <- initEq+trading.pl tradeSize <- total.equity * trade.percent ClosePrice <- as.numeric(Cl(mktdata[timestamp,])) 80 orderqty <- sign(orderqty)*round(tradeSize/ClosePrice) return(orderqty) }
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R Code:
> # rules: > strat <-60 add.rule(strategy = strat,name='ruleSignal', arguments = list(sigcol="signal.gt.zero",sigval=TRUE, orderqty=100, ordertype='market', orderside='long', osFUN='osPercentEquity'),type='enter') > strat <- add.rule(strategy = strat,name='ruleSignal', arguments = list(sigcol="signal.lt.zero",sigval=TRUE, orderqty='all', ordertype='market', orderside='long'),type='exit')
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Define strategy
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Update
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Reporting
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R Code:
> > > > > > > # parameters: fastMA =60 12 slowMA = 26 signalMA = 9 maType="EMA" # apply strategy out<-try(applyStrategy(strategy=strat, portfolios=strat.name, parameters=list(nFast=fastMA, nSlow=slowMA, nSig=signalMA,maType=maType), 80 verbose=F))
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R Code:
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Chart portfolio performance

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R Code:
> > > >
library(PerformanceAnalytics) trading.pl <- getPortfolio(strat.name)$summary$Net.Trading.PL rets <- trading.pl/initEq charts.PerformanceSummary(rets,colorset = bluefocus,xlab="")
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MACD portfolio performance

Net.Trading.PL Performance
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Cumulative Return
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0.015
Daily Return
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Drawdown
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19981221 20000703 20020102 20030701 20050103 20060703 20080102 20090701 20110103
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Outline
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MACD optimization
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The inventor of MACD suggests that the dierence between a 12-day and 26-day exponential moving average be calculated and then smooth via a 9-day exponential moving average Our research interest is to explore if other values provide superior results We will try 3 dierent values for each of fastMA, slowMA, and 60 signalMA, 27 dierent settings All testing will be done on the 9-asset portfolio of S&P Sector Select ETFs with data from Dec-1998 through Aug-2011
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The Omega performance measure

The Omega performance measure is a reward-to-risk ratio that can be mm 40 80 100 120 applied to a time-series of returns 60 (L) =
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b L (1 F (r ))dr L a F (r )dr
where L is some return threshold (e.g. 0)
Omega uses all of the information in the return series and is thus well suited for non-normal distributions Omega is essentially the ratio of a call price to a put price
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Omega performance measure is calculated by the Omega function in PerformanceAnalytics C (L) (L) = 80 P(L)
Shadwick and Keating. Universal Performance Measure. Journal of Performance A Measurement, Spring 2002 Guy Yollin (Copyright
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Omega Performance Measure The Omega performance measure

Portfolio Returns Cumulative Distribution Function P/L Distribution
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0.8 Proportion <= x Density 0.4 0.2 0.00.0 0.5 a -1.0 -0.5 -0.5 0.6 1.0
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L 0.0 b 0.0 daily return 0.5 0.5 1.0 1.5 1.0
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MACD optimization
R Code:
> > > > > fastMA mm <- c(5,10,15) 40 60 80 100 slowMA <- c(20,25,30) signalMA <- c(1,5,10) parm.comb <- expand.grid(fastMA=fastMA,slowMA=slowMA,signalMA=signalMA) head(parm.comb,12) fastMA slowMA signalMA 40 5 20 1 10 20 1 15 20 1 5 25 1 10 25 1 15 60 25 1 5 30 1 10 30 1 15 30 1 5 20 5 10 20 5 15 80 20 5
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> num.opts <- nrow(parm.comb) > res.vec <- rep(NA,num.opts)

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Optimization loop
R Code:
mm 40 60 80 100 120 > for(i in 1:num.opts) { # initialize portfolio and orders try(rm(list=ls(pos=.blotter),pos=.blotter),silent=TRUE) try(rm(list=ls(pos=.strategy),pos=.strategy),silent=TRUE) dummy <- initPortf(name=strat.name,symbols=stock.str, initDate=initDate) initOrders(portfolio=strat.name,initDate=initDate) # apply40 strategy fastMA = parm.comb[i,"fastMA"] slowMA = parm.comb[i,"slowMA"] signalMA = parm.comb[i,"signalMA"] out<-try(applyStrategy(strategy=strat, portfolios=strat.name, parameters=list(nFast=fastMA, nSlow=slowMA, nSig=signalMA,maType=maType), 60 verbose=F)) # calculate performance matric dummy <- updatePortf(Portfolio=strat.name, Dates=paste('::',as.Date(Sys.time()),sep='')) trading.pl <- getPortfolio(strat.name)$summary$Net.Trading.PL rets <- trading.pl/initEq 80 omega <- as.numeric(Omega(rets)) res.vec[i] <- omega }
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Optimization
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Optimization summary
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Performed a true multi-parameter grid search on a multi-asset portfolio
Functionality not supported within TradeStation or similar packages Optimal values:

fastMA = 15 (default = 12) slowMA = 25 (default = 26) signalMA = 10 (default = 9) 60 40
Process ran for approximately 8.5 hours on the RStudio cloud Embarrassingly parallel problem that would be idea for any of Rs parallel computing capabilities (e.g. snow, NetWorkSpaces etc.) 80
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Outline
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RSI (Relative Strength Index)

Momentum oscillator (value between 0 and 100) mm 40 60 80 Published by Welles Wilder in the late 1970 RSI Calculation
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RSI = 100 RS =
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100 1 + RS
mean(up changes) mean(down changes)
typical lengths are 14-days, 9-days, or 25-days
Interpretation
80 Trade reversals between thresholds (e.g. 70/30) Trade break-outs above/below thresholds (e.g. 70/30)
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Semiconductor HOLDR stocks

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HOLDRS are ETFs that represent a basket of stocks in a specic industry segment The Semiconductor HOLDR includes large-cap semiconductor 40 manufacturers as well as semiconductor equipment manufacturers Well apply the RSI system to 5 components of the semiconductor HOLDR ETF
INTC - Intel 60 TXN - Texas Instrument AMAT - Applied Materials ADI - Analog Devices ALTR - Altera 80
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Initialization mm
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R Code:
> # inz currency and stocks > stock.str = c("INTC","TXN","AMAT","ADI","ALTR") > for(symbol in stock.str) 60 stock(symbol, currency="USD",multiplier=1) > # download stocks > start.data <- as.Date("1998-12-22") > end.data <- as.Date("2011-08-09") > initDate <- start.data-1 > for(symbol in stock.str) getSymbols(symbol,from=start.data,to=end.data,adjust=T)
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Define strategy
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Reporting
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R Code:
> > > > > > # inz portfolio, account, orders, strategy strat.name <- "RSI" 60 initEq=1000000 trade.percent = 0.05 dummy <- initPortf(name=strat.name,symbols=stock.str, initDate=initDate) dummy <- initAcct(name=strat.name,portfolios=strat.name, initDate=initDate, initEq=initEq) > initOrders(portfolio=strat.name,initDate=initDate) 80 > strat <- strategy(strat.name)
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Define strategy
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Reporting
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R Code:
> # indicators: > strat <- add.indicator(strategy = strat, name = "RSI", 60 arguments = list(price = quote(getPrice(mktdata))), label="RSI") > # signals: > strat <- add.signal(strategy = strat, name="sigThreshold", arguments = list(threshold=70, column="RSI",relationship="gt", cross=TRUE), label="RSI.gt.70") > strat <- add.signal(strategy = strat, name="sigThreshold", 80 arguments = list(threshold=30, column="RSI",relationship="lt",cross=TRUE), label="RSI.lt.30")
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Dene short entry and exit rules

Define strategy
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Reporting
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R Code:
> # rules: > strat <-60 add.rule(strategy = strat, name='ruleSignal', arguments = list(sigcol="RSI.gt.70", sigval=TRUE, orderqty=-1000, ordertype='market', orderside='short', osFUN='osPercentEquity', replace=FALSE), type='enter', path.dep=TRUE) > strat <- add.rule(strategy = strat, name='ruleSignal', arguments = list(sigcol="RSI.lt.30", sigval=TRUE, orderqty='all', ordertype='market', orderside='short', replace=FALSE), 80 type='exit', path.dep=TRUE)
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Dene long entry and exit rules

Define strategy
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Reporting
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R Code:
> # rules: > strat <-60 add.rule(strategy = strat, name='ruleSignal', arguments = list(sigcol="RSI.lt.30", sigval=TRUE, orderqty= 1000, ordertype='market', orderside='long', osFUN='osPercentEquity', replace=FALSE), type='enter', path.dep=TRUE) > strat <- add.rule(strategy = strat, name='ruleSignal', arguments = list(sigcol="RSI.gt.70", sigval=TRUE, orderqty='all', ordertype='market', orderside='long', replace=FALSE), 80 type='exit', path.dep=TRUE)
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Reporting
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Initialize currency and instruments, and load historic data Initialize portfolio, account, orders, strategy Add indicators, signals, and rules Apply strategy to portfolio Update portfolio, account, equity
R Code: 60
> # apply strategy > out<-try(applyStrategy(strategy=strat, portfolios=strat.name, parameters=list(n=2),verbose=F))
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R Code:
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Reporting
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R Code:
> chart_Posn(Portfolio=strat.name,Symbol="AMAT",Dates="2009::2011") 60 > plot(add_RSI()) > trading.pl <- getPortfolio(strat.name)$summary$Net.Trading.PL > rets <- trading.pl/initEq > charts.PerformanceSummary(rets,colorset = bluefocus,xlab="")
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AMAT performance for RSI strategy

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RSI portfolio performance

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Daily Return
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0.0
60
0.05 0.00 0.02
Drawdown
80
0.15 19981221 20000703 20020102 20030701 20050103 20060703 20080102 20090701 20110103
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Outline
mm
1
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120

40

60

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Bollinger bands
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Bollinger bands are a volatility-sensitive price channel Published by John Bollinger in the early 1980s RSI 40 Calculation
Calculate a simple moving average (typically 20 days) of the C (either the close or weighted-close) Upper band: MA + N StdDev(C ) Lower band: MA N StdDev(C ) 60 typically in the range of 2 to 3 N
Interpretation
Trade reversals between the upper and lower bands Trade break-outs above/below the bands 80
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Oil services HOLDR stocks

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HOLDRS are ETFs that represent a basket of stocks in a specic industry segment The oil services HOLDR includes companies specically involved in oil 40 drilling and related services Well apply the Bollinger band system to 5 components of the oil services HOLDR ETF
SLB 60 - Schlumberger RIG - Transocean HAL - Haliburton BHI - Baker Hughes DO - Diamond Oshore 80
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Initialization mm
40
Define strategy
60
80
Update
100
Reporting
120
40
R Code:
> # inz currency and stocks > stock.str = c("SLB","RIG","HAL","BHI","DO") > for(symbol in stock.str) 60 stock(symbol, currency="USD",multiplier=1) > # download stocks > start.data <- as.Date("1998-12-22") > end.data <- as.Date("2011-08-09") > initDate <- start.data-1 > for(symbol in stock.str) getSymbols(symbol,from=start.data,to=end.data,adjust=T)
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Define strategy
60
80
Update
100
Reporting
120
40
R Code:
> > > > > > # inz portfolio, account, orders, strategy strat.name <- "BBANDS" 60 initEq=1000000 trade.percent = 0.05 dummy <- initPortf(name=strat.name,symbols=stock.str, initDate=initDate) dummy <- initAcct(name=strat.name,portfolios=strat.name, initDate=initDate, initEq=initEq) > initOrders(portfolio=strat.name,initDate=initDate) 80 > strat <- strategy(strat.name)
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mm
Update
Reporting
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40
R Code:
> # indicators: > strat <- add.indicator(strategy = strat, name = "BBands", arguments = list(HLC = quote(HLC(mktdata)), maType='SMA')) > # signals: > strat <-60 add.signal(strat,name="sigCrossover", arguments = list(columns=c("Close","up"),relationship="gt"), label="Cl.gt.UpperBand") > strat <- add.signal(strat,name="sigCrossover", arguments = list(columns=c("Close","dn"),relationship="lt"), label="Cl.lt.LowerBand") > strat <-80 add.signal(strat,name="sigCrossover", arguments = list(columns=c("High","Low","mavg"),relationship="op"), label="Cross.Mid")
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mm
Initialization
40
Define strategy
60
80
Update
100 Reporting
120
40
R Code:
> # rules: > strat <- add.rule(strat,name='ruleSignal', arguments = list(sigcol="Cl.gt.UpperBand",sigval=TRUE, orderqty=-100, 60 ordertype='market', orderside=NULL, threshold=NULL),type='enter') > strat <- add.rule(strat,name='ruleSignal', arguments = list(sigcol="Cl.lt.LowerBand",sigval=TRUE, orderqty= 100, ordertype='market', orderside=NULL, threshold=NULL),type='enter') > strat <- add.rule(strat,name='ruleSignal', arguments = list(sigcol="Cross.Mid",sigval=TRUE, orderqty= 'all', 80 ordertype='market', orderside=NULL, threshold=NULL),type='exit')
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mm
Initialization
40
60
Define strategy
80
100
Reporting
120
40
R Code:
> > > > > # parameters: 60 SD = 2 N = 20 # apply strategy out<-try(applyStrategy(strategy=strat, portfolios=strat.name, parameters=list(sd=SD,n=N),verbose=F))
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Initialization mm
40
Define strategy
60
80
Update
100
Reporting
120
40
R Code:
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mm
Initialization
40
60
Define strategy
80
100
Reporting
120
40
R Code:
> chart_Posn(Portfolio=strat.name,Symbol="DO",Dates="2009::2011") 60 > plot(add_BBands()) > trading.pl <- getPortfolio(strat.name)$summary$Net.Trading.PL > rets <- trading.pl/initEq > charts.PerformanceSummary(rets,colorset = bluefocus,xlab="")
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DO performance for BBands strategy

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Bollinger bands portfolio performance

mm
Cumulative Return
0.02 0.03
40
60
80
100
120
0.01
40
Daily Return
0.000
0.010
0.00
60
Drawdown
0.010
0.010
0.025
80
19981221 20000703 20020102 20030701 20050103 20060703 20080102 20090701 20110103
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Outline
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1
40
60
80
100
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40

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Summary of blotter and quantstrat

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Transaction infrastructure for dening instruments, transactions, portfolios and accounts for trading systems and simulation. Provides portfolio support for multi-asset class and multi-currency portfolios. Still40 heavy development. in Despite beta-status, software is used everyday by hearty working professions in asset management Inherent exibility provided by R allows analysis that is still 60 unavailable in some dedicated commercial packages
Although the software is free, be prepared to pay some dues in terms of time and eort to get things working
R-SIG-FINANCE is your friend
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Quantitative Trading Strategies in R Part 3 of 3

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Computational Finance and Risk Management

Quantitative Trading Strategies in R

Guy Yollin (Copyright

Quantitative Trading Strategies in R

MACD example MACD example extended to multiple assets

Optimizing the MACD trading system RSI example

Bollinger band example Summary

Guy Yollin (Copyright

Quantitative Trading Strategies in R

Kent Russells Timely Portfolio blog: http://timelyportfolio.blogspot.com/

Guy Yollin (Copyright

Quantitative Trading Strategies in R

demos are located in /R-2.13.1/library/quantstrat/demo

Quantitative Trading Strategies in R

MACD example MACD example extended to multiple assets

Optimizing the MACD trading system RSI example

Bollinger band example Summary

Guy Yollin (Copyright

Quantitative Trading Strategies in R

MACD (Moving Average Convergence-Divergence)

Trend-following momentum indicator Published by Gerald Appel in the late 1970

Guy Yollin (Copyright

Quantitative Trading Strategies in R

MACD system in TradeStation

Guy Yollin (Copyright

Quantitative Trading Strategies in R

MACD code in EasyLanguage

MyMACD = MACD( C l o s e , F a s t L e n g t h , S l o w L e n g t h ) ; MACDSig = XAverage ( MyMACD, MACDLength ) ; i f MACDSig c r o s s e s a b o v e 0 t h e n Buy ( MacdLE ) n e x t b a r a t m a r k e t ;

Guy Yollin (Copyright

Quantitative Trading Strategies in R

MACD indicator from TTR

Guy Yollin (Copyright

Quantitative Trading Strategies in R

Initialize currency and trading instruments

Add indicators, signals, and rules

Apply strategy to portfolio

Update portfolio, account, equity

> for(symbol in stock.str) getSymbols(symbol,from=start.data,to=end.data,adjust=T)

Quantitative Trading Strategies in R

Initialize portfolio, account, and orders object

Initialize currency and instruments, and load historic data

Initialize portfolio, account, orders, strategy

Add indicators, signals, and rules

Apply strategy to portfolio

Update portfolio, account, equity

Generate performance reports and graphs

Guy Yollin (Copyright

Quantitative Trading Strategies in R

The add.signals function

Quantitative Trading Strategies in R

The sigThreshold function

R Code: The sigThreshold function

Quantitative Trading Strategies in R

Dene indicators and signals

Initialize currency and instruments, and load historic data

Initialize portfolio, account, orders, strategy

Add indicators, signals, and rules

Apply strategy to portfolio

Update portfolio, account, equity

Generate performance reports and graphs

Guy Yollin (Copyright

Quantitative Trading Strategies in R

Dene order sizing function