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Exercise

Build and backtest a trend-following strategy

Previously, you constructed a signal using two EMA indicators. When the shorter-term EMA is larger than the longer-term EMA, the signal is 1 for entering long positions in the market. Vice versa, when the shorter-term EMA is smaller than the longer-term EMA, the signal is -1 for entering short positions. Now you will implement a trend-following strategy with your signal and perform a backtest using the Google stock.

The historical price data of the Google stock has been preloaded in price_data. The bt package has been imported for you. In addition, signal from the previous exercise is available to use.

Instructions 1/2

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  • Define a strategy EMA_crossover with the signal you constructed in the previous exercise.