## Example ```mermaid graph TD style A fill:#333,stroke:#FFCC00,stroke-width:2px style B fill:#333,stroke:#FFCC00,stroke-width:2px style C fill:#555,stroke:#FFCC00,stroke-width:2px style D fill:#555,stroke:#FFCC00,stroke-width:2px style E fill:#555,stroke:#FFCC00,stroke-width:2px style F fill:#555,stroke:#FFCC00,stroke-width:2px style G fill:#777,stroke:#FFCC00,stroke-width:2px style H fill:#777,stroke:#FFCC00,stroke-width:2px A[Data Ingestion Service] -->|Fetches Data| B[Kubernetes Cluster] B -->|Stores| C[Data Storage: S3/GlusterFS] B -->|Analysis| D[Analysis Microservice] D -->|Generates Signals| E[Signal Generation Microservice] E -->|Executes Orders| F[Order Execution Service] F -->|Places Orders| G[Brokerage API: Oanda] B -->|Monitors System| H[Monitoring & Alerting: Prometheus/Grafana] linkStyle default interpolate basis ``` ## Folder Structure ```mermaid graph TD A("/mean-reversion-trading") --> B("/data") A --> C("/models") A --> D("/strategies") A --> E("/backtesting") A --> F("/trading") A --> G("/utils") A --> H("Dockerfile") A --> I("requirements.txt") A --> J("README.md") B --> B1("/raw") B --> B2("/processed") C --> C1("/trained") C --> C2("model_training.py") D --> D1("mean_reversion_strategy.py") E --> E1("backtest.py") F --> F1("live_trade.py") G --> G1("data_fetcher.py") G --> G2("feature_engineering.py") G --> G3("indicators.py") ``` --- ```plaintext /mean-reversion-trading |-- /data | |-- /raw # Store raw historical data fetched from Oanda | `-- /processed # Processed and feature-engineered datasets | |-- /models | |-- /trained # Saved models after training | `-- model_training.py # Script for ML model training and evaluation | |-- /strategies | |-- mean_reversion_strategy.py # Trading strategy implementation for Backtrader | |-- /backtesting | |-- backtest.py # Script for backtesting strategies using Backtrader | |-- /trading | |-- live_trade.py # Script for live trading on Oanda | |-- /utils | |-- data_fetcher.py # Script for fetching data from Oanda | |-- feature_engineering.py # Utilities for data cleaning and feature engineering | `-- indicators.py # Custom indicators for strategy (e.g., Bollinger Bands, RSI) | |-- Dockerfile # Dockerfile for containerization |-- requirements.txt # Python dependencies `-- README.md # Project documentation ``` --- # Mean Reversion Trading Strategy for EUR/USD with Machine Learning ## Overview This guide is dedicated to developing a mean reversion trading strategy for the EUR/USD currency pair. It harnesses the power of machine learning (ML) via scikit-learn for strategy development, Backtrader for backtesting, and ultimately, deploying the optimized strategy for live trading on Oanda. ## Step 1: Data Preparation ### Fetch Historical EUR/USD Data - **Objective**: Use `oandapyV20` to download 5 years of EUR/USD daily data from Oanda. - **Rationale**: A 5-year period provides a balanced dataset to capture various market phases, essential for training robust mean reversion models. ### Clean and Preprocess Data - **Tasks**: Eliminate duplicates and handle missing data. Standardize prices to ensure consistency across the dataset. - **Normalization**: Apply Min-Max scaling to align features on a similar scale, enhancing model training efficiency. ## Step 2: Exploratory Data Analysis (EDA) and Feature Engineering ### Perform EDA - **Visualization**: Plot price movements with `matplotlib` to identify mean reversion patterns. Analyze price volatility and its correlation with mean reversion points. ### Develop Technical Indicators - **Indicators for Mean Reversion**: Calculate Bollinger Bands and RSI. These indicators help identify overbought or oversold conditions signaling potential mean reversions. ### Feature Engineering - **Feature Creation**: Derive features like the distance from moving averages, Bollinger Band width, and RSI levels to capture market states indicative of mean reversion. ## Step 3: Machine Learning Model Development with Scikit-learn ### Choose an ML Model - **Model Selection**: Start with Logistic Regression to classify potential mean reversion opportunities. Consider Random Forest for a more nuanced understanding of feature relationships. ### Train and Validate the Model - **Cross-Validation**: Implement cross-validation to assess model performance, minimizing the risk of overfitting. - **Metrics**: Evaluate models based on accuracy, precision, recall, and the F1 score to ensure a balanced assessment of the model's predictive capabilities. ## Step 4: Backtesting Strategy with Backtrader ### Integrate ML Model into Backtrader Strategy - **Strategy Implementation**: Embed your scikit-learn model within a custom Backtrader strategy. Use model predictions to drive trade entries and exits based on identified mean reversion signals. ### Execute Backtesting - **Configuration**: Set up Backtrader with historical EUR/USD data, including transaction costs and initial capital. - **Analysis**: Utilize Backtrader's analyzers to evaluate the strategy's performance, focusing on net profit, drawdown, and Sharpe ratio. ## Step 5: Live Trading Preparation ### Paper Trading with Oanda Demo - **Objective**: Validate the strategy under current market conditions using Oanda's demo account. - **Adjustments**: Fine-tune strategy parameters and risk management settings based on paper trading outcomes. ### Transition to Live Trading - **Live Account Switch**: Transition the strategy to a live Oanda account for real trading. - **Capital Management**: Start with conservative capital allocation, gradually scaling based on live performance and risk appetite. ### Continuous Monitoring and Optimization - **Live Performance Tracking**: Closely monitor trading activity and performance metrics. - **Strategy Iteration**: Regularly review and adjust the trading model and strategy parameters in response to evolving market conditions and performance insights. ## Conclusion This guide provides a concise roadmap for creating a mean reversion trading strategy for the EUR/USD pair, leveraging machine learning for signal generation, Backtrader for rigorous backtesting, and Oanda for deployment. It emphasizes a systematic approach from data analysis to live trading, ensuring a well-founded strategy backed by empirical evidence and optimized through practical experience. --- # Swing Trading Project with EUR/USD Using Oanda and scikit-learn ## Step 1: Environment Setup ### Install Python Ensure Python 3.8+ is installed. ### Create a Virtual Environment Navigate to your project directory and run: ```bash python -m venv venv source venv/bin/activate # Unix/macOS venv\Scripts\activate # Windows deactivate ``` ### Install Essential Libraries Create `requirements.txt` with the following content: ``` pandas numpy matplotlib seaborn scikit-learn jupyterlab oandapyV20 requests ``` Install with `pip install -r requirements.txt`. ## Step 2: Project Structure Organize your directory as follows: ``` swing_trading_project/ ├── data/ ├── notebooks/ ├── src/ │ ├── __init__.py │ ├── data_fetcher.py │ ├── feature_engineering.py │ ├── model.py │ └── backtester.py ├── tests/ ├── requirements.txt └── README.md ``` ## Step 3: Fetch Historical Data - Sign up for an Oanda practice account and get an API key. - Use `oandapyV20` in `data_fetcher.py` to request historical EUR/USD data. Consider H4 or D granularity. - Save the data to `data/` as CSV. ```python import os import pandas as pd from oandapyV20 import API # Import the Oanda API client import oandapyV20.endpoints.instruments as instruments # Set your Oanda API credentials and configuration for data fetching ACCOUNT_ID = 'your_account_id_here' ACCESS_TOKEN = 'your_access_token_here' # List of currency pairs to fetch. Add or remove pairs as needed. CURRENCY_PAIRS = ['EUR_USD', 'USD_JPY', 'GBP_USD', 'AUD_USD', 'USD_CAD'] TIME_FRAME = 'H4' # 4-hour candles, change as per your analysis needs DATA_DIRECTORY = 'data' # Directory where fetched data will be saved # Ensure the data directory exists, create it if it doesn't if not os.path.exists(DATA_DIRECTORY): os.makedirs(DATA_DIRECTORY) def fetch_and_save_forex_data(account_id, access_token, currency_pairs, time_frame, data_dir): """Fetch historical forex data for specified currency pairs and save it to CSV files.""" # Initialize the Oanda API client with your access token api_client = API(access_token=access_token) for pair in currency_pairs: # Define the parameters for the data request: time frame and number of data points request_params = {"granularity": time_frame, "count": 5000} # Prepare the data request for fetching candle data for the current currency pair data_request = instruments.InstrumentsCandles(instrument=pair, params=request_params) # Fetch the data response = api_client.request(data_request) # Extract the candle data from the response candle_data = response.get('candles', []) # If data was fetched, proceed to save it if candle_data: # Convert the candle data into a pandas DataFrame forex_data_df = pd.DataFrame([{ 'Time': candle['time'], 'Open': float(candle['mid']['o']), 'High': float(candle['mid']['h']), 'Low': float(candle['mid']['l']), 'Close': float(candle['mid']['c']), 'Volume': candle['volume'] } for candle in candle_data]) # Construct the filename for the CSV file csv_filename = f"{pair.lower()}_data.csv" # Save the DataFrame to a CSV file in the specified data directory forex_data_df.to_csv(os.path.join(data_dir, csv_filename), index=False) print(f"Data for {pair} saved to {csv_filename}") def main(): """Orchestrates the data fetching and saving process.""" print("Starting data fetching process...") # Call the function to fetch and save data for the configured currency pairs fetch_and_save_forex_data(ACCOUNT_ID, ACCESS_TOKEN, CURRENCY_PAIRS, TIME_FRAME, DATA_DIRECTORY) print("Data fetching process completed.") if __name__ == '__main__': # Execute the script main() ``` ## Step 4: Exploratory Data Analysis - Create a new Jupyter notebook in `notebooks/`. - Load the CSV with `pandas` and perform initial exploration. Plot closing prices and moving averages. ## Step 5: Basic Feature Engineering - In the notebook, add technical indicators as features (e.g., SMA 50, SMA 200, RSI) using `pandas`. - Investigate the relationship between these features and price movements. ## Step 6: Initial Model Training - In `model.py`, fit a simple `scikit-learn` model (e.g., LinearRegression, LogisticRegression) to predict price movements. - Split data into training and testing sets to evaluate the model's performance. ## Step 7: Documentation - Document your project's setup, objectives, and findings in `README.md`. ## Next Steps - Refine features, try different models, and develop a backtesting framework as you progress. --- # From Backtesting to Live Trading with Backtrader and Oanda ## Setup and Installation - **Install Required Packages** ```bash pip install backtrader oandapyV20 ``` - **Oanda API Credentials** - Obtain API credentials from your Oanda demo account. ## Backtesting ### 1. Data Preparation - Fetch historical data using Oanda's API for your target currency pairs. ### 2. Strategy Development - Code your trading strategy within a subclass of `bt.Strategy`. - Define indicators, entry and exit logic. ### 3. Backtesting Execution - Initialize a `bt.Cerebro()` engine, adding your strategy and data. - Set initial capital and other parameters. - Run backtest and analyze results using Backtrader's built-in analyzers. ## Transition to Paper Trading ### 1. Configure Live Data Feed - Setup a live data feed from Oanda using the `oandapyV20` package. ### 2. Integrate Oanda Demo as Broker - Configure Backtrader to use Oanda as the broker with your demo account credentials. - This simulates order execution in the demo environment. ### 3. Run Paper Trading - Execute your strategy with Backtrader against the live data feed in simulation mode. - Monitor performance and make adjustments as necessary. ## Going Live ### 1. Strategy Review and Adjustment - Fine-tune your strategy based on insights gained from paper trading. ### 2. Switch to Live Account - Change the API credentials in your script to those of your live Oanda account. ### 3. Start Live Trading - Begin with the smallest lot sizes. - Closely monitor the strategy's live trading performance. ## Key Considerations - **Monitoring**: Keep a close watch on your system's operation during live trading. - **Incremental Deployment**: Gradually increase your trading size based on the strategy's live performance. - **Continuous Improvement**: Regularly update your strategy based on live trading data and market conditions. This markdown guide outlines a focused and actionable path from developing and backtesting trading strategies with Backtrader and Oanda, to paper trading and eventually live trading. ---