From the course: Algorithmic Trading and Stocks Essential Training

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Designing an algorithm

Designing an algorithm

From the course: Algorithmic Trading and Stocks Essential Training

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Designing an algorithm

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- [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 algorithm 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 its 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…

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