Downloading data

Use getSymbols to get data from yahoo or Google (default is yahoo)

getSymbols("AAPL")

Let see what is inside the data.

head(AAPL)

##            AAPL.Open AAPL.High  AAPL.Low AAPL.Close AAPL.Volume AAPL.Adjusted
## 2003-01-02 0.5083427 0.5281666 0.5079888  0.5239188    45357200      0.915166
## 2003-01-03 0.5239188 0.5285210 0.5164849  0.5274589    36863400      0.921349
## 2003-01-06 0.5320605 0.5444505 0.5267507  0.5274589    97633200      0.921349
## 2003-01-07 0.5235650 0.5309990 0.5122366  0.5256886    85586200      0.918258
## 2003-01-08 0.5161310 0.5207326 0.5111750  0.5150689    57411200      0.899707
## 2003-01-09 0.5175469 0.5281666 0.5132987  0.5196706    53813200      0.907746

To extract columns, we use Op, Hi, Lo, Cl, Vo and Ad

Open <- Op(AAPL)   #Open Price
High <- Hi(AAPL)    # High price
Low <- Lo(AAPL)  # Low price
Close<- Cl(AAPL)   #Close Price
Volume <- Vo(AAPL)   #Volume
AdjClose <- Ad(AAPL) # Adjusted close

If you wish to only import at a certain date e.g.,. 2000-01-01 to 2015-09-25, we can restrict the set the data to download.

getSymbols("AAPL", from='2000-01-01',to='2015-09-25')

## [1] "AAPL"

Alternatively, we can load the whole series and restrict using xts function last()

getSymbols("AAPL")

## [1] "AAPL"

AAPL <- last(AAPL,'1 year')
head(AAPL)

##            AAPL.Open AAPL.High AAPL.Low AAPL.Close AAPL.Volume AAPL.Adjusted
## 2020-01-02    296.24    300.60   295.19     300.35    33870100      298.8300
## 2020-01-03    297.15    300.58   296.50     297.43    36580700      295.9247
## 2020-01-06    293.79    299.96   292.75     299.80    29596800      298.2827
## 2020-01-07    299.84    300.90   297.48     298.39    27218000      296.8799
## 2020-01-08    297.16    304.44   297.16     303.19    33019800      301.6555
## 2020-01-09    307.24    310.43   306.20     309.63    42527100      308.0630

Alternatively, we can take the first 3 years by using first():

getSymbols("AAPL")

## [1] "AAPL"

AAPL <- first(AAPL,'3 years')
head(AAPL)

##            AAPL.Open AAPL.High AAPL.Low AAPL.Close AAPL.Volume AAPL.Adjusted
## 2007-01-03  12.32714  12.36857 11.70000   11.97143   309579900      10.36364
## 2007-01-04  12.00714  12.27857 11.97429   12.23714   211815100      10.59366
## 2007-01-05  12.25286  12.31428 12.05714   12.15000   208685400      10.51822
## 2007-01-08  12.28000  12.36143 12.18286   12.21000   199276700      10.57016
## 2007-01-09  12.35000  13.28286 12.16429   13.22429   837324600      11.44823
## 2007-01-10  13.53571  13.97143 13.35000   13.85714   738220000      11.99609

We can also import three stocks at the same time by using a vector.

getSymbols(c("AAPL","GOOG"))

## [1] "AAPL" "GOOG"

Alternatively, we can assign a vector of stocks and import based on the vector.

stocklist <- c("AAPL","GOOG")
getSymbols(stocklist)

The package can also import non-US stocks.

getSymbols("0941.hk")
#If error, try instead the following:
#getSymbols("0941.HK",src="yahoo", auto.assign=FALSE)

head(`0941.HK`)

##            0941.HK.Open 0941.HK.High 0941.HK.Low 0941.HK.Close 0941.HK.Volume
## 2007-01-02        67.25        70.00       67.10          69.6       35293388
## 2007-01-03        69.90        71.80       69.50          70.7       41163203
## 2007-01-04        70.60        70.95       67.30          68.2       37286533
## 2007-01-05        67.50        69.50       66.30          69.5       24502496
## 2007-01-08        67.50        68.40       67.45          67.7       15584163
## 2007-01-09        68.00        68.60       65.55          66.3       17861491
##            0941.HK.Adjusted
## 2007-01-02         42.11264
## 2007-01-03         42.77821
## 2007-01-04         41.26554
## 2007-01-05         42.05212
## 2007-01-08         40.96300
## 2007-01-09         40.11592

Besides prices, very often we are interested in the trading volume. Moreover, we would like to find volume over time: weekly, monthly, quarterly and yearly. We can use apply and sum to calculate the rolling sum of volume to each distinct period.

WeekVoYa<- apply.weekly(Vo(AAPL),sum)
# sum from Monday to Friday
MonthVoYa <- apply.monthly(Vo(AAPL),sum)
# sum to month
QuarterVoYa <- apply.quarterly(Vo(AAPL),sum)
# sum to quarter
YearVoYa <- apply.yearly(Vo(AAPL),sum)
# sum to year

In some case, we are interested in average than the sum. Then we can use apply and mean.

WeekAveVoClYa<- apply.weekly(Vo(AAPL),mean)
# weekly average volume

Charting

Quantmod draw nice charts of following common types:

1. line
2. bars
3. candlesticks

We can use chartSeries() and specify the types directly.

The line chart displays stock price of AAPL in 2007 by using the subset option. The option theme is set to be chartTheme(‘white’) as the default option chartTheme(‘black’) is not printer-friendly.

chartSeries(AAPL,
            type="line",
            subset='2007',
            theme=chartTheme('white'))

The bar chart displays stock price of AAPL in May to June 2007 by using the subset option.

chartSeries(AAPL,
            type="bar",
            subset='2007-05::2007-06',
            theme=chartTheme('white'))

The following candle stick chart displays stock price of AAPL in May only.

chartSeries(AAPL,
            type="candlesticks",
            subset='2007-05',
            theme=chartTheme('white'))

Finally The following candle stick chart displays stock price of AAPL a few days in May.

chartSeries(AAPL,
            type="auto",
            subset='2007-05-10::2007-05-30',
            theme=chartTheme('white'))

Technical Indicators

Technical trading rule (TTR) package is loaded when we load quantmod package.

If you want to use it separately, then just load the package as usual:

install.packages("TTR")
library(TTR)

sma <-SMA(Cl(AAPL),n=20)
tail(sma,n=5)

##                 SMA
## 2020-06-24 339.9440
## 2020-06-25 342.2735
## 2020-06-26 344.0580
## 2020-06-29 346.0545
## 2020-06-30 348.1275

ema <-EMA(Cl(AAPL),n=20)
tail(ema,n=5)

##                 EMA
## 2020-06-24 341.9732
## 2020-06-25 344.1510
## 2020-06-26 345.0538
## 2020-06-29 346.6468
## 2020-06-30 348.3756

bb <-BBands(Cl(AAPL),s.d=2)
tail(bb,n=5)

##                  dn     mavg       up      pctB
## 2020-06-24 310.2851 339.9440 369.6029 0.8391221
## 2020-06-25 312.4778 342.2735 372.0692 0.8786875
## 2020-06-26 316.0863 344.0580 372.0297 0.6711018
## 2020-06-29 319.0240 346.0545 373.0850 0.7908848
## 2020-06-30 322.0402 348.1275 374.2148 0.8195523

M <- momentum(Cl(AAPL), n=2)
head (M,n=5)

##            AAPL.Close
## 2007-01-03         NA
## 2007-01-04         NA
## 2007-01-05   0.178571
## 2007-01-08  -0.027143
## 2007-01-09   1.074286

ROC <- ROC(Cl(AAPL),n=2)
# 2-day ROC
head(ROC,n=5)

##              AAPL.Close
## 2007-01-03           NA
## 2007-01-04           NA
## 2007-01-05  0.014806276
## 2007-01-08 -0.002220547
## 2007-01-09  0.084725818

macd <- MACD(Cl(AAPL), nFast=12, nSlow=26,
             nSig=9, maType=SMA)
tail(macd,n=5)

##                macd   signal
## 2020-06-24 4.702688 3.881592
## 2020-06-25 4.600372 4.069203
## 2020-06-26 4.210396 4.195984
## 2020-06-29 4.315137 4.293894
## 2020-06-30 4.410221 4.367458

rsi = RSI(Cl(AAPL), n=14)
tail(rsi,n=5)

##                 rsi
## 2020-06-24 68.10366
## 2020-06-25 70.22649
## 2020-06-26 60.12087
## 2020-06-29 64.15899
## 2020-06-30 65.55100

Charting with Indicators

chartSeries(AAPL,
            subset='2007-05::2009-01',
            theme=chartTheme('white'))

addSMA(n=30,on=1,col = "blue")

addSMA(n=200,on=1,col = "red")

chartSeries(AAPL,
            subset='2007-05::2009-01',
            theme=chartTheme('white'))

addEMA(n=30,on=1,col = "blue")

addEMA(n=200,on=1,col = "red")

chartSeries(AAPL,
            subset='2007-05::2009-01',
            theme=chartTheme('white'))

addBBands(n=20,sd=2)

chartSeries(AAPL,
            subset='2007-05::2009-01',
            theme=chartTheme('white'))

addMomentum(n=1)

chartSeries(AAPL,
            subset='2007-05::2008-01',
            theme=chartTheme('white'))

addROC(n=7)

chartSeries(AAPL,
            subset='2007-05::2008-01',
            theme=chartTheme('white'))

addMACD(fast=12,slow=26,signal=9,type="EMA")

chartSeries(AAPL,
            subset='2007-05::2009-01',
            theme=chartTheme('white'))

addRSI(n=14,maType="EMA")

sma <- SMA(Cl(AAPL),n=14)
chartSeries(AAPL,
            subset='2007-05::2009-01',
            theme=chartTheme('white'))

addTA(sma, on=1, col="red")

Charting Price changes of two stocks

To compare prices fo different stocks, we need to calculat the price change:

NS <- function(xdat) xdat / coredata(xdat)[1]
a <- NS(Cl(AAPL))-1
g <- NS(Cl(GOOG))-1
m <- NS(Cl(MSFT))-1
chartSeries(a,
            subset = '2007',
            theme=chartTheme('white'))

addTA(g, on=1, col="red", lty="dotted")

addTA(m, on=1, col="blue", lty="dashed")

The option lty is to make the line becomes other line styles where dotted means dotted line and dashed means dashed line.

Performance Evaluation

The package is a collection of econometric functions for performance and risk analysis.

We first install and load PerformanceAnalytics package.

install.packages("PerformanceAnalytics")
library(PerformanceAnalytics)

Evaluating Trading Rules

To simplify, we first evaluate several trading rules based on day trading:

1. buy signal based on simple filter rule
2. buy and sell signals based on simple filter rule
3. buy signal based on RSI
4. buy signal based on EMA and sell signal based on RSI
5. buy signal based on RSI but trading size depends on price history

Finally, we consider the rule that does non-day trading. In this case, we need to keep track of both cash and stock holdings.

library(quantmod)
getSymbols("MSFT")

## [1] "MSFT"

price <- Cl(MSFT) # close price
r <- price/Lag(price) - 1 # % price change
delta <-0.005 #threshold
signal <-c(0) # first date has no signal

#Loop over all trading days (except the first)
for (i in 2: length(price)){
  if (r[i] > delta){
    signal[i]<- 1
  } else
    signal[i]<- 0
}

# Each data is not attached with time
head(signal, n=3)

## [1] 0 0 0

# Assign time to action variable using reclass;
signal<-reclass(signal,price)

# Each point is now attached with time
tail(signal, n=3)

##            [,1]
## 2020-06-26    0
## 2020-06-29    1
## 2020-06-30    1

# Charting with Trading rule
chartSeries(MSFT,
            type = 'line',
            subset="2009-08::2009-09-15",
            theme=chartTheme('white'))

addTA(signal,type='S',col='red')

trade <- Lag(signal,1) # trade based on yesterday signal

ret<-dailyReturn(MSFT)*trade
names(ret)<-"filter"

#Performance Summary
charts.PerformanceSummary(ret, main="Naive Buy Rule")

library(quantmod)
getSymbols("MSFT")

## [1] "MSFT"

price <- Cl(MSFT)
r <- price/Lag(price) - 1
delta<-0.005
signal <-c(NA) # first signal is NA

for (i in 2: length(Cl(MSFT))){
  if (r[i] > delta){
    signal[i]<- 1
  } else if (r[i]< -delta){
    signal[i]<- -1
  } else
    signal[i]<- 0
}
signal<-reclass(signal,Cl(MSFT))

trade1 <- Lag(signal)
ret1<-dailyReturn(MSFT)*trade1
names(ret1) <- 'Naive'
charts.PerformanceSummary(ret1)

day <-14
price <- Cl(MSFT)
signal <- c()                    #initialize vector
rsi <- RSI(price, day)     #rsi is the lag of RSI
signal [1:day+1] <- 0            #0 because no signal until day+1

for (i in (day+1): length(price)){
  if (rsi[i] < 30){             #buy if rsi < 30
    signal[i] <- 1
  }else {                       #no trade all if rsi > 30
    signal[i] <- 0
  }
}
signal<-reclass(signal,Cl(MSFT))
trade2 <- Lag(signal)

#construct a new variable ret1
ret1 <- dailyReturn(MSFT)*trade1
names(ret1) <- 'Naive'
# construct a new variable ret2
ret2 <- dailyReturn(MSFT)*trade2
names(ret2) <- 'RSI'

retall <- cbind(ret1, ret2)
charts.PerformanceSummary(retall, 
                          main="Naive v.s. RSI")

signal [1:day+1] <- 0            

for (i in (day+1): length(price)){
  if (rsi[i] < 30){             
    signal[i] <- 1
  }else {                       
    signal[i] <- 0
  }
}

for (i in 1:length(price)){
  signal[i] <- 0
  if (isTRUE(rsi[i] < 30)){             
    signal[i] <- 1
  }
}

Combining two indicators: filter and RSI

Test the following strategy using filter and RSI based on day trading:

• Buy signal based on filter rule.

• Sell signal based on RSI rule.

• Tie-breaking: buy-signal has priority

• We use 14-day RSI and use 70 as threshold for selling.

n <- 14
delta<-0.005
price <- Cl(MSFT)         
r <- price/Lag(price) - 1    
rsi <- RSI(price, n) 
signal <-c()    # first signal is NA
signal[1:n] <-0


# Generate Trading Signal
for (i in (n+1):length(price)){
    if (r[i] > delta){
         signal[i]<- 1
    } else if (rsi[i] > 70){
         signal[i]<- -1
    } else
         signal[i]<- 0
}
signal<-reclass(signal,price)

## Apply Trading Rule
trade3 <- Lag(signal)
ret3<-dailyReturn(MSFT)*trade3 
names(ret3) <- 'Combine'
retall <- cbind(ret1, ret2, ret3)

To draw trade performance summary with different colors, we use the option colorset. Common options includes redfocus, bluefocus, greenfocus, rainbow4equal andrich12equal.

charts.PerformanceSummary(
  retall, main="Naive v.s. RSI v.s. Combine",
  colorset=bluefocus)

Trading Size

Wealth: 1 million

Trade unit: 1000 stocks per trade

Test the following strategy based on 14-day RSI :

• Buy one more unit if RSI <30.

• Keep buying the same if 30 < RSI < 50

• Stop trading if RSI >= 50

Evaluate based on day trading

To take trade size into account, we need to keep track of wealth:

qty <-1000
day <-14

signal <- c()    #trade signal with size
signal[1:(day+1)] <- 0 

price <- Cl(MSFT)

wealth <-c()
wealth[1:(day+1)] <- 1000000  

return<-c()                  
return[1:(day+1)] <- 0

profit <-c()
profit[1:(day+1)] <- 0

We now generate trading signal with size:

rsi <- RSI(price, day)  #rsi is the lag of RSI
for (i in (day+1): length(price)){
  if (rsi[i] < 30){  #buy one more unit if rsi < 30
    signal[i] <- signal[i-1]+1
  } else if (rsi[i] < 50){  #no change if rsi < 50
    signal[i] <- signal[i-1] 
  } else {         #sell  if rsi > 50
    signal[i] <- 0
  }
}
signal<-reclass(signal,price)

Now we are ready to apply Trade Rule

Close <- Cl(MSFT)
Open <- Op(MSFT)
trade <- Lag(signal)
for (i in (day+1):length(price)){
  profit[i] <- qty * trade[i] * (Close[i] - Open[i])  
  wealth[i] <- wealth[i-1] + profit[i]
  return[i] <- (wealth[i] / wealth[i-1]) -1  
}
ret3<-reclass(return,price)

charts.PerformanceSummary(ret3, main="Trade Size")

Non-Day Trading

Trading signal:

• Buy signal arises if 14-day RSI < 30

• Sell signal arises if 14-day RSI > 50

Trading Rule

• Buy 300 units under buy signal

• Sell all when sell signal appears

Initial wealth: 10,000

Note that we need to keep track of both cash and stock holdings.

qty <-300
day <-14

signal <- c()   #trade signal
signal[1:(day+1)] <- 0 

price <- Cl(MSFT)

stock <- c()  #stock holding
stock[1:(day+1)] <-0

cash <-c()
cash[1:(day+1)] <- 10000  

Trading signal is based on simple RSI:

rsi <- RSI(price, day)  #rsi is the lag of RSI
for (i in (day+1): length(price)){
  if (rsi[i] < 30){  #buy one more unit if rsi < 30
    signal[i] <- 1
  } else if (rsi[i] < 50){ #no change if rsi < 50
    signal[i] <- 0
  } else {         #sell  if rsi > 50
    signal[i] <- -1
  }
}
signal<-reclass(signal,price)

Assume buying at closing price. We keep track of how cash and stock changes:

trade <- Lag(signal)    #rsi is the lag of RSI
for (i in (day+1): length(price)){
  if (trade[i]>=0){
    stock[i] <- stock[i-1] + qty*trade[i]
    cash[i] <- cash[i-1] - 
      qty*trade[i]*price[i]
  } else{
    stock[i] <- 0
    cash[i] <- cash[i-1] + 
      stock[i-1]*price[i]
  }
}
stock<-reclass(stock,price)
cash<-reclass(cash,price)

To evaluate performance, we calculate equity using cash and stock holdings.

equity <-c()
equity[1:(day+1)] <- 10000 

return<-c()                  
return[1:(day+1)] <- 0

for (i in (day+1): length(price)){
  equity[i] <- stock[i] * price[i] + cash[i]
  return[i] <- equity[i]/equity[i-1]-1
}
equity<-reclass(equity,price)
return<-reclass(return,price)

Performance Charts

charts.PerformanceSummary(return, 
                          main="Non-Day-Trading")

We can plot the equity line showing how the performance of the strategy:

chart_Series(equity, main="equity line")

We can check the cash account over time:

chart_Series(cash, name="Cash Holding")

Finall, We can stock holdings:

chart_Series(stock, name="Stock Holding")