Algorithmic Trading Course in Python - Trend Detection Strategy

#python #coding #algorithmictrading #tradingstrategy #technicalanalysis

This python coding tutorial will walk you through the steps to create a relative volume inspired trading algorithm that detects strong and weak trends.

00:00 - 02:17 What is Relative Volume?
02:17 - 03:11 Get Historic Stock Price Data
03:11 - 04:27 Calculate Relative Volume
04:27 - 05:01 Technical Analysis
05:01 - 07:03 Build the Trading Algorithm
07:03 - 09:30 Visualize Our Algorithm
09:30 - 13:01 Example Charts
13:01 - 13:58 Back Test Function
13:58 - 15:37 Back Test Results

Relative Volume (RVOL) is a technical analysis indicator that measures the current trading volume of an asset relative to its average trading volume over a specific period. It helps traders assess whether an asset is experiencing unusually high or low trading activity, which can signal potential price movements or market interest.

The formula for Relative Volume is RVOL = Current Volume / Average Volume
Current Volume: The trading volume of the asset at the current time or session.
Average Volume: The average trading volume over a chosen time period (e.g., 10, 20, or 50 days).

Interpretation:

RVOL greater than 1: The current trading volume is higher than the average, indicating increased interest or activity in the asset.
RVOL less than 1: The current trading volume is lower than the average, suggesting reduced interest or activity.
Applications:

High RVOL: Often seen during earnings releases, news events, or breakouts, which can result in significant price movements.
Low RVOL: Indicates a lack of market interest, often leading to lower volatility.
Use in Trading:

Confirmation Tool: High RVOL can confirm the validity of price breakouts or breakdowns.
Filters for Strategies: Traders can use RVOL to identify stocks with unusual volume for day trading, swing trading, or scalping strategies.
Visualization:

RVOL is often plotted as a histogram or displayed as a numerical value on trading platforms, making it easy to compare the current volume to the average.

This trading algorithm coded in python uses both Relative Volume and Simple Moving Averages to assess whether the stock is experiencing a strong or weak trend.

Simple Moving Average (SMA):
The Simple Moving Average (SMA) is a commonly used technical indicator in financial analysis that calculates the average price of an asset over a specific number of periods. It smooths out price data, making it easier to identify trends by reducing short-term fluctuations.

Types of SMAs:

Short-Term SMA: Uses fewer periods (e.g., 10 or 20) and is more responsive to price changes.
Long-Term SMA: Uses more periods (e.g., 50, 100, or 200) and provides a broader view of the trend.
Interpretation:

Above SMA: If the price is above the SMA, it can indicate an upward trend.
Below SMA: If the price is below the SMA, it may signal a downward trend.
Crossovers:
Golden Cross: A short-term SMA crosses above a long-term SMA, signaling a potential bullish trend.
Death Cross: A short-term SMA crosses below a long-term SMA, signaling a potential bearish trend.
Applications:

Trend Identification: Identifies whether an asset is trending upward, downward, or sideways.
Support and Resistance: SMAs can act as dynamic support or resistance levels.
Entry and Exit Signals: Traders use crossovers or deviations from the SMA to time entries and exits.
Strengths:

Simple and easy to calculate.
Helps smooth out price data, making trends more visible.
Limitations:

Lagging Indicator: It reacts to price changes after they occur, which may delay signals.
Equal Weighting: All prices in the period are equally weighted, which may not reflect recent price changes effectively compared to other moving averages like the Exponential Moving Average (EMA).

Intrendias is not financial advice.

[miloskrsmanovic]

Well done, very useful video. This is a very interesting video, maybe you could try to read data and detect positions in real time, I think that would also be very useful and interesting to see how it would work

[munivoltarc]

With out using any price lagging indicators, only pure price action, with Elliott wave and Wycoff theory in action, can u code this?

[sussy]

why you didnt share equity curve graph??