What is financial trading

Financial Trading in Python

Chelsea Yang

Data Science Instructor

The concept of financial trading

Financial trading is the buying and selling of financial assets

Various financial instruments to trade:

Equities
Bonds
Forex
Commodities
Cryptocurrencies

Why people trade

To make a profit by taking calculated risks

Long positions: profit from upward price movement
Short positions: profit from downward price movement

Market participants:

Institutional traders
Retail traders

Trading vs. investing

Trading:

Shorter holding period
Focus on short-term trends or price fluctuations
Take both long and short positions

Investing:

Longer holding period
Focus on market fundamentals
Take mostly long positions

Financial time series data

Time series data: a sequence of data points indexed in time order

import pandas as pd
# Load the data
bitcoin_data = pd.read_csv("bitcoin_data.csv", index_col='Date', parse_dates=True)
print(bitcoin_data.head())

               Open     High      Low    Close      Volume
Date                                                      
2019-01-01  3746.71  3850.91  3707.23  3843.52  4324200990
2019-01-02  3849.22  3947.98  3817.41  3943.41  5244856835
2019-01-03  3931.05  3935.69  3826.22  3836.74  4530215218
2019-01-04  3832.04  3865.93  3783.85  3857.72  4847965467
2019-01-05  3851.97  3904.90  3836.90  3845.19  5137609823

Plot line chart of time series data

import matplotlib.pyplot as plt
plt.plot(bitcoin_data['Close'], color='red')
plt.title("Daily close price")
plt.show()

An example of a line plot of stock close price

Candlestick chart

Candlestick: On the left: a green, bullish candlestick and on the right: a red, bearish candlestick.

Each candlestick displays high, low, open, and close
The color indicates bullish (rising prices) or bearish (falling prices) movement

Plot candlestick chart with Python

import plotly.graph_objects as go

# Define the candlestick
candlestick = go.Candlestick(
    x = bitcoin_data.index,
    open = bitcoin_data['Open'],
    high = bitcoin_data['High'],
    low = bitcoin_data['Low'],
    close = bitcoin_data['Close'])

# Create a plot  
fig = go.Figure(data=[candlestick])

# Show the plot
fig.show()

Plot candlestick

Let's practice!

Financial Trading in Python