How To Design Algorithmic Trading Strategies Using R?

With the increase in the number crunching power of computer, algorithmic forex trading is becoming more and more popular. You can read this previous post in which we explain how to predict GBPUSD price using the new Statistical Learning Theory Kernel Based Regularized Least Squares Regression Method. Statistical Learning Theory is a new branch of statistical analysis that uses the increase in number crunching power of computers to make new vector based models that can solve many non linear problems.

But before you can start using R in designing algorithmic forex trading strategies, you will have to master statistical analysis methods like ARIMA, GARCH etc. In this power we discuss how to apply the ARIMA plus GARCH in modelling a financial time series.  You will have to learn how to use R to implement these statistical analysis methods. R is an open source software that can be freely downloaded. This is unlike most other statistical analysis software that are quite expensive. R is a very powerful software that can connected with MT4 so that you are able to do real time statistical analysis using it. In the above post we have mentioned how you are going to do it.This webinar provides a good introduction to R for trading!

Now unlike technical analysis which is intuitive and graphical in nature, statistical analysis is highly mathematical in nature. You should have good grounding in mathematics in order to make some progress with learning statistical analysis.  Then you will need to move a bit higher and learn the new Statistical Learning Theory that can also be implemented through R. This is a good webinar that explains how to design algorithmic trading strategies using R!

Quantmod R Package

Quantmod is an R package that has been developed exclusively for the financial market analysis. Quantmod stands for Quantitative Financial Modelling Framework. This R package can draw candlestick charts and do all stuff of statistical analysis that you want it to do.  This video explains how Quantmod package is used in practice!

This is another good video on how to use quantmod and apply it in practice.


About The Author


I have done masters from Harvard University. I am interested in day trading currencies, options and stocks.