.. _alpha:

=========================
Building Formulaic Alphas
=========================
.. currentmodule:: qlib

Introduction
============

In quantitative trading practice, designing novel factors that can explain and predict future asset returns are of vital importance to the profitability of a strategy. Such factors are usually called alpha factors, or alphas in short.


A formulaic alpha, as the name suggests, is a kind of alpha that can be presented as a formula or a mathematical expression.


Building Formulaic Alphas in ``Qlib``
=====================================

In ``Qlib``, users can easily build formulaic alphas.

Example
-------

`MACD`, short for moving average convergence/divergence, is a formulaic alpha used in technical analysis of stock prices. It is designed to reveal changes in the strength, direction, momentum, and duration of a trend in a stock's price.

`MACD` can be presented as the following formula:

.. math::

    MACD = 2\times (DIF-DEA)

.. note::

    `DIF` means Differential value, which is 12-period EMA minus 26-period EMA.

    .. math::

        DIF = \frac{EMA(CLOSE, 12) - EMA(CLOSE, 26)}{CLOSE}

    `DEA` means a 9-period EMA of the DIF.

    .. math::

        DEA = \frac{EMA(DIF, 9)}{CLOSE}

Users can use ``Data Handler`` to build formulaic alphas `MACD` in qlib:

.. note:: Users need to initialize ``Qlib`` with `qlib.init` first.  Please refer to `initialization <../start/initialization.html>`_.

.. code-block:: python

    >> from qlib.data.dataset.loader import QlibDataLoader
    >> MACD_EXP = '(EMA($close, 12) - EMA($close, 26))/$close - EMA((EMA($close, 12) - EMA($close, 26))/$close, 9)/$close'
    >> fields = [MACD_EXP] # MACD
    >> names = ['MACD']
    >> labels = ['Ref($close, -2)/Ref($close, -1) - 1'] # label
    >> label_names = ['LABEL']
    >> data_loader_config = {
    ..     "feature": (fields, names),
    ..     "label": (labels, label_names)
    .. }
    >> data_loader = QlibDataLoader(config=data_loader_config)
    >> df = data_loader.load(instruments='csi300', start_time='2010-01-01', end_time='2017-12-31')
    >> print(df)
                            feature     label
                               MACD     LABEL
    datetime   instrument
    2010-01-04 SH600000   -0.011547 -0.019672
               SH600004    0.002745 -0.014721
               SH600006    0.010133  0.002911
               SH600008   -0.001113  0.009818
               SH600009    0.025878 -0.017758
    ...                         ...       ...
    2017-12-29 SZ300124    0.007306 -0.005074
               SZ300136   -0.013492  0.056352
               SZ300144   -0.000966  0.011853
               SZ300251    0.004383  0.021739
               SZ300315   -0.030557  0.012455

Reference
=========

To learn more about ``Data Loader``, please refer to `Data Loader <../component/data.html#data-loader>`_

To learn more about ``Data API``, please refer to `Data API <../component/data.html>`_