Sample Trading Strategy

Study Notes:

In this lesson, you would:

• Learn how to construct and execute a trading strategy
• Precautions to be taken in automated trading

Sample Trading Strategy

The strategy first connects to the TWS. In the next step, we source the snapshot script which holds the custom callback function.

On line 6, we create a contract using the tws stock function.

From lines 8 to 11, we set the parameters for the two simple moving averages and the initial current position to zero.

Next, we pull the initial require market data using the custom callback.

The strategy then enters a while loop on line 19. On line 20, we use the rbind function to combine the data frames by row. On line 22, we use the unique function to eliminate the duplicate rows from the data frame.

The If statement block starting on line 23, keeps checking the data until there is enough data for the strategy to proceed further. From line 31 to 34, we define the logic for buy and sell signals based on the two simple moving averages.

Once a signal is obtained, an order is constructed using the twsOrder function and is place using the placeOrder function. The current position is updated on every buy or sell position filled.

On execution, the strategy produces the following output:

Initially there is not enough data for the signals to generate. Once the data is collected, signals are placed and you can see the orders getting executed in the R console and also on the trader workstation orders window. Since the trading logic is placed in the while loop with a true value, the strategy will keep placing orders until it is stopped.

Precautions

Following are the precautions that the trades have to keep in mind when they are trading algorithmically using the trading APIs.

• Traders should have a robust risk management in place in case the default TWS risk management does not catch all the strategy specific risks.
• Code block to ensure order price and order quantity sanity.
• Write test case to ensure that the strategy does not run into order sending loops.
• Write test cases to run on every API upgrade to ensure that nothing is broken.
• Write robust codes to handle socket connection losses, error messages from Interactive Brokers, and network errors.

Conclusion

The functions from the IBrokers package are easy to use and can be implemented to construct various kinds of trading strategies for automated trading on TWS. This concludes the final lesson in the “Trading Using R” Online Course. We hope that you liked it. Thank You!

Note – The IBrokers package provides native R access to Interactive Brokers Trader Workstation API