With our broker now accepting orders and responding to our requests, we can begin to design a fully-automated trading system. In this section, we will explore how to design and implement a mean-reverting algorithmic trading system.
Building a mean-reverting algorithmic trading system
Designing the mean-reversion algorithm
Suppose we believe that in normal market conditions, prices fluctuate, but tend to revert back to some short-term level, such as the average of the most recent prices. In this example, we assume that the EUR/USD currency pair is exhibiting a mean-reversion property in the near short-term period. First, we resample the raw tick-level data into standard time series intervals, for example, at one-minute intervals...
