diff --git a/projects/forex_algo_trading.md b/projects/forex_algo_trading.md index 315bde8..b73d891 100644 --- a/projects/forex_algo_trading.md +++ b/projects/forex_algo_trading.md @@ -1,3 +1,74 @@ +# Guide to Algorithmic Trading with a Focus on Live Trading + +## Overview +Transitioning to live trading with algorithmic strategies, especially on the Oanda platform for forex trading, requires a methodical approach. This guide emphasizes preparation, strategy development, testing, and optimization with live trading as the primary goal. + +## Step 1: Understanding Forex and Algorithmic Trading + +- **Forex Market Basics**: Familiarize yourself with the mechanics of forex trading, focusing on the EUR/USD pair. +- **Algorithmic Trading Principles**: Understand the fundamentals of algorithmic trading, including automated strategies, risk management, and the regulatory environment. + +## Step 2: Development Environment Setup + +- **Python Installation**: Ensure you have Python 3.x installed. +- **Virtual Environment**: + ```bash + python -m venv algo-trading-env + source algo-trading-env/bin/activate # or algo-trading-env\Scripts\activate on Windows + ``` +- **Library Installation**: + ```bash + pip install pandas numpy matplotlib requests oandapyV20 backtrader + ``` + +## Step 3: Oanda Account and API Access + +- **Demo Account Setup**: Register for an Oanda demo account to access historical data and perform paper trading. +- **API Key Generation**: Secure an API key from Oanda's dashboard for programmatic access. + +## Step 4: Data Acquisition + +- **Granularity and Timeframe**: Choose daily (D) or hourly (H1) data for initial analysis, aligning with the intended trading strategy. +- **Historical Data Fetching**: Utilize `oandapyV20` to download historical EUR/USD data, focusing on the required granularity. + +## Step 5: Exploratory Analysis and Indicators + +- **Data Analysis**: Conduct exploratory data analysis (EDA) to identify patterns or trends using `pandas` and `matplotlib`. +- **Indicator Computation**: Calculate key indicators like Bollinger Bands (BB) and Relative Strength Index (RSI) that align with mean reversion strategies. + +## Step 6: Strategy Formulation + +- **Trading Rules**: Define clear trading signals based on your chosen indicators. +- **Strategy Coding**: Implement your strategy within a framework like Backtrader for backtesting. + +## Step 7: Comprehensive Backtesting + +- **Backtesting with Backtrader**: Test your strategy against historical data, adjusting parameters to optimize performance. +- **Performance Metrics**: Evaluate strategy success using net profit, drawdown, Sharpe ratio, and other relevant metrics. + +## Step 8: Paper Trading on Demo Account + +- **Live Data Integration**: Configure Backtrader to use Oanda's demo account for real-time data feed. +- **Simulation**: Execute your strategy in a simulated environment to assess its performance under current market conditions. + +## Step 9: Preparing for Live Trading + +- **Strategy Optimization**: Refine your strategy based on paper trading outcomes, focusing on robustness and consistency. +- **Risk Management Protocols**: Establish comprehensive risk management rules, including stop-loss orders, position sizing, and maximum drawdown limits. +- **Regulatory Compliance**: Ensure understanding and adherence to trading regulations relevant to your jurisdiction. + +## Step 10: Transition to Live Trading + +- **Account Switch**: Transition from the demo to a live Oanda account, updating API credentials accordingly. +- **Capital Allocation**: Start with minimal capital to mitigate risk and gradually increase based on performance and comfort level. +- **Continuous Monitoring**: Actively monitor live trading activity, being prepared to make adjustments as needed. + +## Conclusion + +Live trading with an algorithmic strategy is an iterative process requiring continuous learning, adaptation, and vigilance. This guide provides a structured path to live trading, emphasizing preparation, strategy development, and rigorous testing. + +--- + ## 1. Understanding the Tools ### 1.1 Scikit-learn