8.1 Interday Trading
Trading signal:
Buy signal arises if 14-day RSI < 30
Sell signal arises if 14-day RSI > 50
Trading Rule:
Buy 300 units under buy signal
Sell all when sell signal appears
Initial wealth: 10,000
Note that we need to keep track of both cash and stock holdings.
qty <-300
day <-14
signal <- c() #trade signal
signal[1:(day+1)] <- 0
price <- Cl(MSFT)
stock <- c() #stock holding
stock[1:(day+1)] <-0
cash <-c()
cash[1:(day+1)] <- 10000 Trading signal is based on simple RSI:
rsi <- RSI(price, day) #rsi is the lag of RSI
for (i in (day+1): length(price)){
if (rsi[i] < 30){ #buy one more unit if rsi < 30
signal[i] <- 1
} else if (rsi[i] < 50){ #no change if rsi < 50
signal[i] <- 0
} else { #sell if rsi > 50
signal[i] <- -1
}
}
signal<-reclass(signal,price)Assume buying at closing price. We keep track of how cash and stock changes:
trade <- Lag(signal) #rsi is the lag of RSI
for (i in (day+1): length(price)){
if (trade[i]>=0){
stock[i] <- stock[i-1] + qty*trade[i]
cash[i] <- cash[i-1] -
qty*trade[i]*price[i]
} else{
stock[i] <- 0
cash[i] <- cash[i-1] +
stock[i-1]*price[i]
}
}
stock<-reclass(stock,price)
cash<-reclass(cash,price)To evaluate performance, we calculate equity using cash and stock holdings.
equity <-c()
equity[1:(day+1)] <- 10000
return<-c()
return[1:(day+1)] <- 0
for (i in (day+1): length(price)){
equity[i] <- stock[i] * price[i] + cash[i]
return[i] <- equity[i]/equity[i-1]-1
}
equity<-reclass(equity,price)
return<-reclass(return,price)Performance Charts
We can plot the equity line showing how the performance of the strategy:
We can check the cash account over time:
Finall, We can stock holdings:
