BASICS:
When an investor is "going long" on a stock, it means they are buying the stock with the expectation that its price will increase in the future.Goal: To buy low and sell high.(bull)
When an investor is "going short" on a stock, they are selling stock they do not own, borrowing it from a broker, with the expectation that the stock price will decrease. Goal: To sell high and buy back lower.(bear)
SHARPE RATIO:
How risky the investment is? Can the investment be better than the riskfree investment?
Sharpe ratio = root(total working days) * Mean(returns)/standard deviation(returns)
Optimum sharpe ratio threshold for passing the pretests > 1.25 , working days is taken as 252
TURNOVER: The value of the ratio of the value traded to the value of the portfolio.
It should be >= 1% and <= 70% for passing the pretests.
FITNESS: Sharpe * root(abs(returns)/max(turnover,0.125))
Fitness should be greater than 1 for passing the pretests.
RETURNS: Returns = (annual profit or loss)/(0.5*book size)
Book size typically means the total money that the portfolio holds. The more the returns the better is the algorithm.
DRAWDOWNS: It depicts the amount of risk the investment holds. It is the amount of dollar difference between the largest peak and its lowest point of the PNL chart. (Profit and loss chart)
Drawdowns = (Dollar amount of the largest peak through the drop in PNL chart)/(0.5 * book size)
MARGIN: Profit per dollar traded = PNL / (Total dollars invested)
THINGS TO KEEP IN MIND FOR PASSING THE PRETESTS:
-Maximum weight of any one stock cannot exceed 10%.
9ec7c3a1-1a66-49db-ab5b-705204724899
Technical Analysis
Basic Concepts:
Price Charts (Line, Bar, Candlestick)
Trends (Uptrend, Downtrend, Sideways)
Support and Resistance Levels
Technical Indicators:
Moving Averages (SMA, EMA)
Relative Strength Index (RSI)
Moving Average Convergence Divergence (MACD)
Bollinger Bands
Stochastic Oscillator
Chart Patterns:
Head and Shoulders
Double Top and Double Bottom
Cup and Handle
Flags and Pennants
Triangles (Ascending, Descending, Symmetrical)
Candlestick Patterns:
Doji
Hammer and Hanging Man
Engulfing Patterns
Morning Star and Evening Star
Shooting Star
Volume Analysis:
Volume Trends
On-Balance Volume (OBV)
Volume Moving Average
Advanced Topics:
Elliott Wave Theory
Fibonacci Retracement and Extensions
Ichimoku Cloud
Pivot Points
Risk Management:
Position Sizing
Stop-Loss Orders
Risk-Reward Ratio
Quantitative Trading
Mathematical and Statistical Foundations:
Probability Theory
Statistics (Mean, Variance, Standard Deviation)
Time Series Analysis
Regression Analysis
Hypothesis Testing
Programming Skills:
Python or R
Libraries and Tools: NumPy, pandas, Matplotlib, SciPy, statsmodels
Data Handling and Manipulation
Algorithm Development:
Backtesting Frameworks (e.g., Backtrader, Zipline)
Strategy Implementation
Performance Metrics (Sharpe Ratio, Drawdown)
Machine Learning:
Supervised Learning (Regression, Classification)
Unsupervised Learning (Clustering, Dimensionality Reduction)
Feature Engineering
Financial Markets and Instruments:
Equities, Bonds, Derivatives
Market Microstructure
Order Types and Execution
Risk Management and Optimization:
Portfolio Optimization
Risk Models (Value at Risk, Conditional Value at Risk)
Diversification Strategies
Advanced Topics:
High-Frequency Trading (HFT)
Sentiment Analysis
Natural Language Processing (NLP) for financial data
Software and Tools:
Trading Platforms (e.g., MetaTrader, QuantConnect)
Data Sources (e.g., Bloomberg, Yahoo Finance, Quandl)
API Integration