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.
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.
# Define the strategy
bt_strategy = bt.Strategy('EMA_crossover',
[____,
bt.algos.Rebalance()])