From the course: Algorithmic Trading and Stocks Essential Training

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Testing algorithm accuracy

Testing algorithm accuracy

From the course: Algorithmic Trading and Stocks Essential Training

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Testing algorithm accuracy

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- Now that we understand how to build basic algorithms around simple rules, like moving average, it's time to broaden our view about what rules might we be interested in. I've gone through and gathered data from 1990 through 2017 on the VX. And I've graphed that data for us here. And if this graph looks familiar, it's because we visited it before. What we see in blue is the moving average line. And in yellow, we have the adjusted close price for the VX. And since we're buying and selling on a daily basis, those are the two variables we're most interested in. Now, what do you observe here? Well, one thing that stands out to me, is that the adjusted close, those daily values, they're much more volatile than the moving average. And we already know that, right? That's the basis on which we'd previously built our moving average rule of thumb. But there are times where, as we observe, particularly say between 1990 and 2001,…

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