# The summary from Artificial Intelligence for Trading at Udacity

[TOC]

## Basic Quantitative Trading

In this topic, you will learn the basic fundamental needed to understand the stock market, and how trading works along with how to preprocess the data.

### Terminology

[resource](https://www.elearnmarkets.com/blog/25-stock-market-terms-for-beginners/)

### Stock splits

<figure>
<img
src="https://carmichael-hill.com/wp-content/uploads/2020/08/081220_Apple-Stock-Split-History.jpg"
alt="The beautiful MDN logo.">
<figcaption>
<a href="[test](https://carmichael-hill.com/wp-content/uploads/2020/08/081220_Apple-Stock-Split-History.jpg)">Image source</a>
</figcaption>
</figure>

In the stock market, company sometimes split the stock to increase the number of shares which will affect how we observe the price. In practice, we usually handle it by adjusting the price.

More [detail](https://www.thebalance.com/what-is-adjusted-closing-price-5190242#:~:text=Suppose%20a%20company's%20shares%20sell,get%20the%20adjusted%20closing%20value.).

### Technical indicators

Observing only the raw price value is too noisy due to fluctuation from the market. Technical indicator is the tool to help trader to extract some useful key indicators to make a good decision.

For instance,

* Moving Average
* Exponential Moving Average
* Bollinger Band
* Relative Strength Index

### Stock returns

**Returns** describes the relative of change between time to time, as a trader, we normally focus on how much the stock price has increased.

$Returns = \frac{Price_t - Price_{t-1}}{Price_{t-1}}$

However, quantitative analyst usually uses **Log-Returns** instead, because the numerical property is more stable.

$LogReturns = \ln(\frac{Price_t}{Price_{t-1}})$

More [detail](https://quantivity.wordpress.com/2011/02/21/why-log-returns/).

### Trading strategy

It is a set of rules that determine what stocks to trade, when to trade, and how much money to invest.