- [Instructor] Now that we've learned how…to construct a basic data set,…it's time to start putting that into practice…with some basic algorithmic trading development.…Now, I've gathered data for us from the year 2010…through 2017 on a product called the VIX.…The VIX is the market's fear gauge.…The VIX is a stationary measure,…meaning, that over time, while it fluctuates up and down,…it will always return to its' mean value.…We've looked at the VIX previously…and saw that even when it spikes at various times,…it ultimately returns, or reverts to it's mean value.…
In this case, we're interested in trying to trade,…not the VIX itself,…because you can't buy and sell the VIX directly,…but rather, products that are associated with the VIX.…And in particular, I've pulled returns data…on a long volatility linked product…that is based on the VIX.…We want to develop a trading strategy…that tries to capitalize on this.…To do that, we're going to look at the moving average…for the VIX, versus the VIX itself.…And I've added two additional columns for us,…
Author
Michael McDonald
Released
3/14/2018Professor Michael McDonald provides a brief primer on securities markets. He explains how data helps investors forecast performance and automate trading. Then he moves into the practical steps: coming up with algorithmic trading rules and developing and testing an algorithm. Finally, he shows how the algorithm can be applied and eventually expanded to other securities. Anyone working in financial services, or interested in investing in the stock market, will be able to use these tutorials to understand and develop simple trading algorithms of their own.
- Define what a share of stock is.
- Classify the type of trading that attempts to capitalize on the bid-ask spread.
- Name the rule that can be used as a metric for Fed interference in the market.
- State the first step in a data analysis project.
- Identify the type of characteristic algorithmic trading relies on.
- Break down how VAR is used to manage risk.
Skill Level Intermediate
Duration
Views
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Introduction
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Welcome45s
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1. The Basics of Securities Markets
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Basics of stocks4m 10s
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Basics of stock markets3m 40s
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Basics of trading stocks4m 54s
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Algorithms in Excel2m 52s
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Stocks and the Fed2m 50s
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Big data in finance2m 19s
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2. Investing and Securities
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3. Building Algorithms
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Gather data for an algorithm3m 53s
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Design an algorithm3m 49s
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Test algorithm accuracy4m 54s
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Predict economic variables4m 34s
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Advanced algorithms3m 46s
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4. Using Trading Algorithms
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Conclusion
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Next steps51s
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Video: Design an algorithm