Pairs Trading - Changing Time Resolution by Andrew Czeizler

Andrew Czeizler INVESTOR

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First i want to say, that you have created an amazing tool and community for not only trading but reprodcible science in

general.

I am looking at changing algorithm parameters to experiment with lower time frames.

I am looking at your pairs trading algorithm attached below.

Obiously i am getting the error -

Backtest Handled Error: Order Error: id: 2, Insufficient buying power to complete order (Value:12386.2475), Reason: Id: 2, Initial Margin: 6194.123759, Free Margin: 5883.4498536

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Andrew Czeizler

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Andrew Czeizler

1.6k ,

I assume because i am trading a higher time frames i am running out of money.

Is there anyway to change the algorithm so it only trades a smaller selection of portoflio at one time?

Would this be the best way to fix it?

Many thanks,

Best,

Andrew

Andrew Czeizler

1.6k ,

Apologies backtest attached.

Best,

Andrew

Jing Wu

242.2k ,

self.Sell(symbol, quantity)

self.Buy(symbol, quantity)

The quantity here determines how many shares to buy/sell. You can calculate the order quantity to achieve target-percent holdings with

self.CalculateOrderQuantity(symbol, weight)

The "weight" controls the target percentage.

Andrew Czeizler

1.6k ,

Thank you so much Jing!

I have made some changes and the code is attached :)

if you could give it a breif look, that would be amazing.

I am getting another error -

Backtest Handled Error: Unable to compute order quantity of XOM. Reason: The order quantity is less than the lot size of 1 and has been rounded to zero.Target order value 73.66402874735100000. Order fees 1. Order quantity 0.0000000000000000000000000000.. Returning null

Im not sure why.Many thanks,Best,Andrew

Jing Wu

242.2k ,

In equity trading, lot size refers to the minimum number of shares you can buy in one transaction. The lot size is 1 for stocks. It means you should at least buy one share. You can not buy 0.3 shares or 1.3 shares. When quantity = self.CalculateOrderQuantity(symbol, weight) computes the order quantity, it returns a decimal value. When the self.Sell(symbols, quantity) or self.Buy(symbol, quantity) takes a float quantity, LEAN will round the float number to the multiple of the lot size.

This error message means the available cash is not sufficient to buy even 1 share of the specified stock. You can add a check before placing an order for example

if spread[-1] > mean + self.threshold * std:

    if not self.Portfolio[self.symbols[0]].Quantity > 0 and not self.Portfolio[self.symbols[0]].Quantity < 0:

         quantity = float(self.CalculateOrderQuantity(self.symbols[0],0.2)) 

         if quantity > 1:

         self.Sell(self.symbols[1], quantity)

         self.Buy(self.symbols[0],  ratio * quantity)

Andrew Czeizler

1.6k ,

Hi Jing!

Thank you! It works!

amazing!

I am now trying it with forex data but for some reason i am getting errors.

I have spent an hour over it but cant see my error.

Best,

Andrew

Norman Aybar

11 ,

Jing,

What would be the equivalent solution to the 'The order quantity is less than the lot size of 1' error for the algorithm framework? Playing with the execution model quantity calculation does not seem to fix it :(

Jing Wu

242.2k ,

Hi Andrew,

The forex asset has QuoteBar data. data[symbol] in OnData(self, data) is a quote bar. You define the rolling window with QuoteBar type.

            i.hist_window = RollingWindow[QuoteBar](self.numdays)

Jing Wu

242.2k ,

Hi norman_aybar, the warning message means your buying power is not sufficient to buy even one share. You can reduce the weight if you use SetHoldings(symbol, weight). If you use the MarketOrder(symbol, quantity), you need to make sure your buying power is sufficient to buy or sell the specified quantity.

self.CalculateOrderQuantity(symbol, weight) can help you calculate the order quantity based on your available buying power and your weight allocation.

Andrew Czeizler INVESTOR

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