applyRules: apply the rules in the strategy to arbitrary market data

Description Usage Arguments Details Dimension Reduction for Performance See Also

View source: R/rules.R

Description

In typical usage, this function will be called via applyStrategy. In this mode, this function will be called twice, once with path.dep=FALSE and then again in stepping over the time indexes of the mktdata object.

Usage

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applyRules(portfolio, symbol, strategy, mktdata, indicators = NULL,
  signals = NULL, parameters = NULL, ..., path.dep = TRUE,
  rule.order = NULL, debug = FALSE)

Arguments

portfolio

text name of the portfolio to associate the order book with

symbol

identfier of the instrument to find orders for. The name of any associated price objects (xts prices, usually OHLC) should match these

strategy

an object of type 'strategy' to add the rule to

mktdata

an xts object containing market data. depending on rules, may need to be in OHLCV or BBO formats, and may include indicator and signal information

indicators

if indicator output is not contained in the mktdata object, it may be passed separately as an xts object or a list.

signals

if signal output is not contained in the mktdata object, it may be passed separately as an xts object or a list.

parameters

named list of parameters to be applied during evaluation of the strategy,default NULL, only needed if you need special names to avoid argument collision

...

any other passthru parameters

path.dep

TRUE/FALSE whether rule is path dependent, default TRUE, see Details

rule.order

default NULL, use at your own risk to adjust order of rule evaluation

debug

if TRUE, return output list

Details

This function, because of its path dependent nature and the order of rule evaluation discussed in add.rule, will likely take up most of the execution time of a strategy backtest.

Individual rule functions may need to use <<- to place hold and holdtill variables into play. These would be most likely implemented by risk rules. When hold==TRUE, any open oders will still be processed (orders are NOT canceled automatically, but no new orders may be entered. type='risk' rules will still function during a hold. Note that hold must be set via a custom rule. We tend to set hold in an order or risk rule.

quantstrat has a significant amount of logic devoted to handling path-dependent rule execution. Most of that code/logic resides in this function.

This function, along with ruleOrderProc, addOrder, and applyStrategy will likely need to be replaced to connect to a live market infrastructure.

Dimension Reduction for Performance

In evaluation of path-dependent rules, the simplest method, and the one we used initially, is to check the rules on every observation in the time series of market data. There are cases where this will still be required, but we hope to limit them as much as possible. Looping in R is generally discouraged, and on high frequency data for strategy evaluation it can produce completely unacceptable results.

The solution we've employed is to utilize a state machine to evaluate the rules only when deemed necessary. This approach makes use of what we know about the strategy and the orders the strategy places (or may place) to reduce the dimensionality of the problem.

As discussed in add.rule, the first step in this dimension reduction is to look for places in the time series where signals may cause the strategy to enter or change orders. This creates an index of timestamps that must be evaluated. This index should be significantly shorter than the full number of observations. quantstrat will always run applyRules on each of these indices where we've previously figured out that the strategy might want to do something.

The next step in dimension reduction works on the order book. If there are open orders, we need to figure out when they might get filled. For market orders, this is the next observation. For limit orders, we can locate the index timestamps after the order is placed to see when the order might cross. We will add this index to the list of indices to be evaluated. There is of course no guarantee that the order will still be open at that time, that trading will not be on hold because of a risk rule, or that something else hasn't interfered. Adding the index to the list only tells the loop inside applyRules that rules (including order processing rules) need to be checked at that index, to see if anything needs to happen.

For trailing orders, the picture is somewhat more complicated. Trailing orders may move on each new observation, per the method described in addOrder. To speed up evaluation of when such an order may cross, we need to combine the possible crossing logic for the limit orders, above, with some additional logic to handle the trailing orders. We begin by evaluating when the order price might be moved. We then examine the market data between the current index and the point at which the order may move. if there is a (possible) cross, we insert that index into the indices for examination. If not, we insert the index of the next probable move.

It should be noted that this dimension reduction methodology does 'look ahead' in the data. This 'look ahead' is only done after the order has been entered in the normal path-dependent process, and only to insert new indices for evaluation, and so should not introduce biases.

See Also

add.rule applyStrategy


naturalsmen/quantstrat documentation built on May 23, 2017, 10:38 a.m.