Construct an EMA crossover signal
Trend-following strategies believe that "the trend is your friend," and use signals to indicate the trend and profit by riding it.
You want to build and backtest a trend-following strategy. First, you decide to use two EMAs (exponential moving averages) to construct the signal. When the shorter-term EMA, EMA_short
, is larger than the longer-term EMA, EMA_long
, you will enter long positions in the market. Vice versa, when EMA_short
is smaller than EMA_long
, you will enter short positions.
A 10-day EMA and 40-day EMA have been pre-calculated and saved in EMA_short
and EMA_long
. The historical price data of the Google stock has been preloaded in price_data
. In addition, the bt
package has been imported for you.
This exercise is part of the course
Financial Trading in Python
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Construct the signal
signal[____] = 1
signal[____] = -1