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Apprendre Challenge: Signal Visualization with Moving Averages | Visualizing Market Trends and Indicators
Python for Traders

bookChallenge: Signal Visualization with Moving Averages

In real-world trading, visualizing moving averages and their crossovers can help you spot potential buy or sell signals. You will work with a hardcoded set of closing prices, calculate two moving averages, and plot both together. Your goal is to clearly mark every point where the short-term average (3-day) crosses above or below the long-term average (5-day), highlighting possible trading signals.

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import pandas as pd import matplotlib.pyplot as plt import numpy as np # Hardcoded closing prices for 15 days data = { "date": pd.date_range("2024-01-01", periods=15, freq="D"), "close": [100, 102, 101, 105, 108, 110, 107, 106, 108, 109, 111, 113, 112, 114, 115] } df = pd.DataFrame(data) df.set_index("date", inplace=True) # Calculate 3-day and 5-day simple moving averages df["SMA_3"] = df["close"].rolling(window=3).mean() df["SMA_5"] = df["close"].rolling(window=5).mean() # Find crossover points df["signal"] = 0 df["signal"][df["SMA_3"] > df["SMA_5"]] = 1 df["signal"][df["SMA_3"] < df["SMA_5"]] = -1 df["crossover"] = df["signal"].diff() # Plotting plt.figure(figsize=(12, 6)) plt.plot(df.index, df["close"], label="Close Price", color="black", linewidth=2) plt.plot(df.index, df["SMA_3"], label="3-Day SMA", color="blue", linestyle="--") plt.plot(df.index, df["SMA_5"], label="5-Day SMA", color="red", linestyle="-.") # Mark crossover points buy_signals = df[df["crossover"] == 2] sell_signals = df[df["crossover"] == -2] plt.scatter(buy_signals.index, buy_signals["close"], marker="^", color="green", s=100, label="Buy Signal (3>5)") plt.scatter(sell_signals.index, sell_signals["close"], marker="v", color="red", s=100, label="Sell Signal (3<5)") plt.title("Moving Average Crossover Signals") plt.xlabel("Date") plt.ylabel("Price") plt.legend() plt.grid(True) plt.tight_layout() plt.show()
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Note
Definition

Definition: A moving average crossover occurs when a short-term moving average crosses above (bullish) or below (bearish) a longer-term moving average. Traders often use these crossovers to generate buy or sell signals.

Tâche

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Plot the closing prices and both moving averages using the provided hardcoded data. Then, mark all crossover points with buy (when the 3-day SMA crosses above the 5-day SMA) and sell (when the 3-day crosses below the 5-day) markers. Your plot should:

  • Display the close price, 3-day SMA, and 5-day SMA.
  • Mark every crossover with a green upward triangle for buy signals.
  • Mark every crossover with a red downward triangle for sell signals.
  • Include a legend and axis labels.

Solution

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Section 2. Chapitre 7
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bookChallenge: Signal Visualization with Moving Averages

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In real-world trading, visualizing moving averages and their crossovers can help you spot potential buy or sell signals. You will work with a hardcoded set of closing prices, calculate two moving averages, and plot both together. Your goal is to clearly mark every point where the short-term average (3-day) crosses above or below the long-term average (5-day), highlighting possible trading signals.

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import pandas as pd import matplotlib.pyplot as plt import numpy as np # Hardcoded closing prices for 15 days data = { "date": pd.date_range("2024-01-01", periods=15, freq="D"), "close": [100, 102, 101, 105, 108, 110, 107, 106, 108, 109, 111, 113, 112, 114, 115] } df = pd.DataFrame(data) df.set_index("date", inplace=True) # Calculate 3-day and 5-day simple moving averages df["SMA_3"] = df["close"].rolling(window=3).mean() df["SMA_5"] = df["close"].rolling(window=5).mean() # Find crossover points df["signal"] = 0 df["signal"][df["SMA_3"] > df["SMA_5"]] = 1 df["signal"][df["SMA_3"] < df["SMA_5"]] = -1 df["crossover"] = df["signal"].diff() # Plotting plt.figure(figsize=(12, 6)) plt.plot(df.index, df["close"], label="Close Price", color="black", linewidth=2) plt.plot(df.index, df["SMA_3"], label="3-Day SMA", color="blue", linestyle="--") plt.plot(df.index, df["SMA_5"], label="5-Day SMA", color="red", linestyle="-.") # Mark crossover points buy_signals = df[df["crossover"] == 2] sell_signals = df[df["crossover"] == -2] plt.scatter(buy_signals.index, buy_signals["close"], marker="^", color="green", s=100, label="Buy Signal (3>5)") plt.scatter(sell_signals.index, sell_signals["close"], marker="v", color="red", s=100, label="Sell Signal (3<5)") plt.title("Moving Average Crossover Signals") plt.xlabel("Date") plt.ylabel("Price") plt.legend() plt.grid(True) plt.tight_layout() plt.show()
copy
Note
Definition

Definition: A moving average crossover occurs when a short-term moving average crosses above (bullish) or below (bearish) a longer-term moving average. Traders often use these crossovers to generate buy or sell signals.

Tâche

Swipe to start coding

Plot the closing prices and both moving averages using the provided hardcoded data. Then, mark all crossover points with buy (when the 3-day SMA crosses above the 5-day SMA) and sell (when the 3-day crosses below the 5-day) markers. Your plot should:

  • Display the close price, 3-day SMA, and 5-day SMA.
  • Mark every crossover with a green upward triangle for buy signals.
  • Mark every crossover with a red downward triangle for sell signals.
  • Include a legend and axis labels.

Solution

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Tout était clair ?

Comment pouvons-nous l'améliorer ?

Merci pour vos commentaires !

Section 2. Chapitre 7
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