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.

Define the signal with EMA_short and EMA_long.

Exercise

Construct an EMA crossover signal

Instructions 1/2

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Instructions 1/2

Exercise