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Why you should be Learning Python for Trading and Investing
Python is Easy to use and Easy to Learn
Python is easy to use and easy to learn, yet extremely powerful.
It is widely used for server automation, running web applications, desktop applications, robotics, science, machine learning and more. And, yes, it is very much capable of handling large sets of financial data.
As Python is a scripting language it is easy to do iterative development of software as there is no compilation waiting time. At the same time it is possible to extend Python code with code in C or C++ for parts in the app or code library that need better optimization and better speeds. The scientific libraries that I will discuss later on in this post make extensive use of this possibility.
Guido van Rossum developed Python as a programming language that would help him automate his day to day work. He also based it on a programming language that was developed for teaching people how to code. Because of this Python is simple and practical in nature.
Plotting a Basic Line Graph is Easy with Matplotlib
Included: Idle the IDE for Python
There are Many Excelent Libraries to use when Researching Financial Data
I typically use the following Python libraries when I research trading and investing strategies:
- The standard library
Almost everything can be done with the standard library. Other non-standard libraries build upon this library to implement specific use cases and basically to make complicated stuff easier to implement.
This is a combination of libraries used for science, mathematics and engineering.
Part of SciPy and implements among other stuff matrices and vectorisation.
Part of SciPy and implements advanced plotting capabilities.
Part of SciPy. Implements working with dataframes and timeseries.
Besides these libraries there are some additional libraries helpfull for data scraping, wrangling, munging and working with APIs:
Library for parsing HTML. Very useful if you want to get data from websites.
This library allows for programmatical access to websites, like filling out a form and posting it, etc.
Most APIs require authentication when accessing them. This can be accomplished using the tools in the standard library, but the Requests Library makes it almost "Curl" - like simple.
Also very powerful:
A library that let's you implement machine learning algorithms.
Natural Language Toolkit, Makes sense out of unstructured text based data, like for instance twitter feeds, news, etc.
And to make your live as a researcher of trading strategies even more easy, there are many trading related APIs, that have a python library ready to access the data.
The web.DataReader method allows you to pull data from Yahoo Finance and Google Finance.
import pandas.io.data as web import datetime start = datetime.datetime(2010, 1, 1) end = datetime.datetime(2013, 1, 27) f = web.DataReader("AAPL", 'yahoo', start, end)
"Get millions of financial and economic datasets from hundreds of publishers directly into Python."
Example: Testing a Simple Strategy on Historical Financial Pricing Data
import pandas.io.data as web import pandas import datetime import pylab import math def pairtrade(p1,p2): start = datetime.datetime(2008, 01, 01) end = datetime.datetime(2014, 03, 03) P1=web.DataReader(p1, 'yahoo', start, end) P1['Norm'] = (P1['Close'] - P1['Close'].shift(1)) /P1['Close'] P1['Norm'] = P1['Norm'].fillna(0.0) P2=web.DataReader(p2, 'yahoo', start, end) P2['Norm'] = (P2['Close'] - P2['Close'].shift(1)) / P2['Close'] P2['Norm'] = P2['Norm'].fillna(0.0) df = pandas.DataFrame(index = P1.index) df['diff'] = P2['Norm'] - P1['Norm'] df['cum'] = df['diff'].cumsum() pylab.plot(P1.index,P1['Norm'].cumsum()) pylab.plot(P2.index,P2['Norm'].cumsum()) pylab.plot(df.index,df['cum']) pylab.title("Short: " + p1 + " and Long: " + p2 \ + "\n MDD: " + str(highWM(df)) + " %" + " Sharpe: " + str(sharpe(df))) #pylab.show() pylab.savefig("Short_" + p1 + "_Long_" + p2 + ".png") pylab.close() return df def highWM(df): maxDD = 0.0 highWaterMark = 0.0 for i in df.index: if df['cum'][i] < highWaterMark: drawDown = highWaterMark - df['cum'][i] if drawDown > maxDD: maxDD = drawDown if df['cum'][i] > highWaterMark: highWaterMark = df['cum'][i] return maxDD*100 def sharpe(df): return ( df['diff'].mean() / df['diff'].std() ) * math.sqrt(len(df['diff']) ) def main(): pairtrade('^aex', '^gdaxi') pairtrade('^aex', '^gspc') pairtrade('^aex', '^ftse') pairtrade('^aex', '^ixic') pairtrade('^aex', '^rut') main()
So, will you Choose Python for Trading and Investing?
Python gets Work done
Python can also be sued to automate all kind of tasks, like:
- Checking if sites are up or down
- Automated restarting of services
- Generating configuration files
- Making backups
- Moving files around
- And much more
Other uses of Python
If you wanna use Python to research and develop your own trading and investing strategies, you can use most of the tools that I discussed here. If you are looking for ideas on how to use Python, then check out the Python related posts at www.davetromp.net.