Finance.Computations54 - solution for building trading strategies

What will you get

With the help of Finance.Computations54 and our team you will:

• create your own strategies for stock trading
• verify and test strategies with backtesting and paper trading
• optimize trading strategies
• adapt strategies for online trading
• forecast market or index behavior
• build your own indexes

What Finance.Computations54 is used for

To develop Finance.Computations54 and the accompanying infrastructure we went a long way which allowed us to create an efficient and reliable framework for computations.

Finance.Computations54 provides the following features:

• quick strategy creation for verification on historical data as well as paper trading
• strategy creation for live trading
• ready connection to Interactive Brokers
• quick addition of any other brokers
• access to historical databases of Norgate, Sharadar, including databases of cryptoassets
• fast strategies adaptation for cryptocurrency trading
• access to ready trading strategies
• support of highly qualified engineers with financial background

Technical details

Financial and other derivative factors which are integrated in Finance.Computation54:

• Open - price at an opening of the market (per day/week/month).
• High - the highest price of the period (per day/week/month).
• Low - the lowest price of the period (per day/week/month).
• Close - price at a closing of the market (per day/week/month).
• Volume - number of sales transactions (per day/week/month).
• Turnover - money turnover (per day/week/month).
• Return (daily/weekly/monthly) - the percentage of prices at the end and beginning of the period. It shows how the price has changed over the period: a negative return indicates a fall in price, a positive return indicates an increase in price. 
  Suppose the price was 65.31 at the beginning of the period and by the end of the period decreased to 63.1, then return = 100 * (63.1 - 65.31) / 65.31 = -3.38%. It means that the price has fallen by 3.38% compared to the beginning of the period.
• MomentumScore (daily/monthly) - the arithmetic mean of Returns for periods of different duration. It shows the average change in price over different periods. 
  For example, if the return for 1 month is 7%, for 3 months is 17%, for 6 months is 15%, and for 12 months is 30%, MomentumScore = (7 + 17 + 15 + 30) /4=17.25%. The more MomentumScore is, the more profit the asset can give.
• RSI (daily/weekly) allows to estimate the overbought, oversold. It takes a value from 0 to 100. If the price rises rapidly over a short period, it is most likely that it will fall soon - this condition is called overbought. If RSI > 80, the price is in the overbought zone. Conversely, when the price falls rapidly over a short period, it will probably rise soon - this condition is called oversold.
• Connors RSI (CRSI) allows to estimate overbought or oversold conditions. It takes a value from 0 to 100. Unlike RSI, this indicator gives signals earlier. It is recommended to use it with other indicators because sometimes it can give false signals.
• Liquidity is an indicator of the ability to sell an asset quickly at a market price. The more liquidity is, the faster it will be possible to sell the asset.
• Volatility is a fluctuation of asset prices in the market. If volatility is low, the market is at rest and price fluctuations are moderate. High volatility indicates sharp and strong price spikes. If the volatility is high, it is possible to gain more profit but the risks are also higher. On the chart the level of fluctuations shows the size of candles.
• Standard deviation (STD) shows the average deviation of the price from its average value for the period. It helps to assess the volatility and risks of an asset. 
  The calculation of volatility and STD is identical. The difference is that volatility is calculated for 100 days by default, and STD - for 65 days (~3 months), although these parameters can be changed.
• Market capitalization is the market value of a company. Companies with small capitalization have more growth potential but they are risky. Companies with larger capitalization are more reliable and their value falls more slowly in times of crisis.
• Dividend yield (DY) is the ratio of dividend (part of the profit returned to the shareholder for holding the stock) to the share price. It is used to compare shares of different companies to show maximum dividend income.
• Industry shows which industry sector the company belongs to. It can be used to select assets with the greatest variety of sectors. Possible sectors: Real Estate, Healthcare, Basic Materials, Energy, Industrials, Consumer Cyclical, Utilities, Consumer Defensive, Technology, Financial Services, Communication Services.
• PriceDayChange (internal factor Finance54) - the percentage change of different price types (high, low, close, open) within one day. 
  For example, if open=62.7 and high=63.2, the percentage change of high relative to open will be 100 * (63.2 - 62.7) / 62.7 = 0.8%.
• PreviousDayPriceChange (internal factor Finance54) - the percentage change of different price types (high, low, close, open) in one day comparing to the previous day (similar to PriceDayChange but prices are taken for two days in a row).
• Simple Moving Average (SMA) - the arithmetic average of prices for a certain period. SMA allows to assess the direction of trend. If the current price is higher than SMA, the trend is up, otherwise the trend is down.
• SMAV (internal factor Finance54) - the arithmetic mean of close * volume over a certain period. It estimates the average value of money turnover.
• WeekHigh (internal factor Finance54) defines the week with the highest price (and the price) for the required period.
• RecentWeekHigh (internal factor Finance54) shows how many days ago was the highest price for the period indicated in weeks.

Option factors:

• Strike - strike price of the option.
• Last - last value of the option (it can even refer to the previous day).
• Bid - price of demand.
• Ask - price of supply.
• Volume - volume of trades (number of contracts).
• Delta - change in option price when the price of underlying asset changes. Delta of call options takes values from 0 to 1, put options - from 0 to -1. 
  For example, if delta of call option is 0.35 and the price of the asset increases (decreases) by $1, then the value of the option can be expected to increase (decrease) by 35 cents. If delta of put option is -0.7 and the price of the asset increases (decreases) by $1, then the value of the option can be expected to decrease (increase) by 70 cents.
• Implied volatility rank (IVR) estimates how high or low current implied volatility (IV) is compared to the level of implied volatility over the last year (52 weeks). 
  For example, if current IV is 34.5%, minimum IV for the year is 17%, maximum IV is 37%, then IVR = (34.5-17)/(37-17)*100=87.5%. It means that current implied volatility is quite high so the option price will be also high. It will benefit option sellers.

Examples of our strategies

In Finance.Computations54 calculation system are integrated several publicly available strategies.

Examples of calculating basic strategies from the Alpha formula using Finance.Computations54:

Conservative strategy in growing markets

Input parameters used for strategy run from 2004-01-01 to 2020-06-01

Entry rules: 
Momentum months: 1, 3, 6, 12 
Portfolio Limit: 5

Max year drawdown: -11.59% 
Total: 312.37%

Conservative strategy in falling markets

Input parameters used for strategy run from 2007-01-01 to 2020-07-01

Entry rules: 
Long-term trailing return is negative, days used: 252 
Intermediate-term return is negative, days used: 21 
2-period RSI is above: 70

Exit rules: 
2-period RSI is below: 15 
Intermediate return turns positive, days used: 21

Max year drawdown: -1.520% 
Total: 80.73%