Building Formulaic Alphas with Qlib Using MACD

# alpha


.. _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 = EMA(DIF, 9)

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 = '2 * ((EMA($close, 12) - EMA($close, 26))/$close - EMA((EMA($close, 12) - EMA($close, 26))/$close, 9))'
    >> 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    0.008781 -0.019672
               SH600004    0.006699 -0.014721
               SH600006    0.005714  0.002911
               SH600008    0.000798  0.009818
               SH600009    0.017015 -0.017758
    ...                         ...       ...
    2017-12-29 SZ300124    0.015071 -0.005074
               SZ300136   -0.015466  0.056352
               SZ300144    0.013082  0.011853
               SZ300251   -0.001026  0.021739
               SZ300315   -0.007559  0.012455

.. _expression_syntax:

Expression syntax and migration
===============================

Feature expressions are a restricted language, not general Python.
``Qlib`` interprets their syntax and calls registered operators rather than evaluating arbitrary Python code.
Standard Alpha158/Alpha360 feature definitions and registered custom operators remain supported.
For an upgrade checklist covering expressions, file imports, and extension
registries, see :ref:`config_migration`.

Supported expressions include:

.. code-block:: text

    $close
    Ref($close, 1) / $close - 1
    Mean($close, 2 + 3)
    $close / (1 + 0.01)
    If(Gt($close, $open), $close, $open)
    ($close > $open) & ($volume > 0)
    Ref(*[$close, 1])
    Mean($close, **{"N": 2 + 3})
    Ref($close, [1, 5, 10][0])
    Ref(*[$close, 1, 99][:2])
    Ref($close, 5 if (1 < 2 and not False) else 10)

You can use feature references (``$field`` and point-in-time ``$$field``), registered operator calls, arithmetic on expressions, and single comparisons.
Operator arguments can include literals, lists, tuples, dictionaries, and named arguments where the operator accepts them.
Numeric parameter arithmetic is supported, including ``+``, ``-``, ``*``, ``/``, ``//``, ``%``, and ``**``.
Constant arithmetic requires real numbers; integers are limited to 4096 bits and the absolute value of a constant exponent is limited to 4096.
String/list repetition (such as ``'x' * n`` or ``[1] * n``) and complex-valued constant arithmetic are rejected.
The final result must be a Qlib ``Expression`` object, not a standalone constant.

Safe parameter syntax
---------------------

* ``*`` expands literal lists or tuples into positional arguments or another list/tuple.
  ``**`` expands literal dictionaries into keyword arguments or another dictionary.
  Arbitrary iterables and mapping objects are not accepted.
* Dictionary keys must be literal scalars (numbers, booleans, strings, bytes, or ``None``), not expression objects or tuples.
  Keyword argument names must be strings, and duplicate keyword arguments are rejected.
  Dictionary literals retain Python's last-value-wins behavior when keys are repeated.
* Literal lists, tuples, dictionaries, strings, and bytes support indexing.
  Sequences also support slices with integer bounds and steps.
  These containers can hold expressions, but expression objects themselves cannot be indexed: ``[$close][0]`` is supported, while ``$close[0]`` is not.
* Each list, tuple, or dictionary is limited to 4096 items, including items introduced by expansion.
  A call is limited to 4096 positional and keyword arguments in total.
* Literal scalar ``<``, ``<=``, ``>``, ``>=``, ``==``, and ``!=`` comparisons, including chained comparisons, are supported.
  Scalar ``and``, ``or``, ``not``, and conditional expressions preserve Python's short-circuit behavior.
  Their truth-value tests must be built from literal scalars, optionally using constant arithmetic or literal-container lookups; they cannot contain Qlib operator calls.
  For example, ``$close if True else $open`` is supported, but ``$close if $volume > 0 else $open`` is not.

All branches are checked for supported syntax and registered operator names before any operators are constructed, even if a branch will not be selected.
String arguments are preserved literally; text such as ``"$close"`` inside a string is not rewritten into a feature reference.
Dataset and disk-cache field normalization also preserve spaces inside literals and the token boundaries needed by scalar conditions.

Expression logic and unsupported Python syntax
----------------------------------------------

For elementwise logic involving Qlib expressions, use ``&`` and ``|`` with parenthesized comparisons, or ``If``.
Write ``($close > 0) & ($close < 10)`` instead of ``0 < $close < 10``.
Use ``If($volume > 0, $close, $open)`` instead of a Python conditional whose test is an expression.
Python ``and``, ``or``, ``not``, and chained comparisons involving expression objects are rejected rather than silently changing their meaning.

Attribute access, lambdas, comprehensions, and arbitrary function calls inside expression strings remain unsupported.
Move such logic into trusted Python code or a registered custom operator.
These restrictions do not affect normal Python code used to generate expression strings:

.. code-block:: Python

    fields = [f"Mean($close, {window})" for window in [5, 10, 20]]

Unsupported syntax and unknown operator names raise ``qlib.data.expression_parser.ExpressionSyntaxError``, a subclass of ``ValueError``.
Operator-specific argument validation still applies.

Register custom operators before use, for example through ``qlib.init(custom_ops=[...])``; merely making a Python function importable does not make it an expression operator.
See ``tests/test_register_ops.py`` for an example.
For file-based custom operators, put ``trusted: true`` in each operator's
configuration alongside ``class`` and ``module_path``; see the working example
in :ref:`config_migration`. This permits that file import only and never
relaxes the expression grammar.

.. note::

    Custom operator code must be trusted. The expression language restricts syntax, but does not sandbox registered operators or impose general resource limits on expression evaluation.

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>`_