Better Strategies 5: A Short-Term Machine Learning System

It’s time for the 5th and final part of the Build Better Strategies series. In part 3 we’ve discussed the development process of a model-based system, and consequently we’ll conclude the series with developing a data-mining system. The principles of data mining and machine learning have been the topic of part 4. For our short-term trading example we’ll use a deep learning algorithm, a stacked autoencoder, but it will work in the same way with many other machine learning algorithms. With today’s software tools, only about 20 lines of code are needed for a machine learning strategy. I’ll try to explain all steps in detail.  Continue reading “Better Strategies 5: A Short-Term Machine Learning System”

Build Better Strategies! Part 4: Machine Learning

Deep Blue was the first computer that won a chess world championship. That was 1996, and it took 20 years until another program, AlphaGo, could defeat the best human Go player. Deep Blue was a model based system with hardwired chess rules. AlphaGo is a data-mining system, a deep neural network trained with thousands of Go games. Not improved hardware, but a breakthrough in software was essential for the step from beating top Chess players to beating top Go players. 
   In this 4th part of the mini-series we’ll look into the data mining approach for developing trading strategies. This method does not care about market mechanisms. It just scans price curves or other data sources for predictive patterns. Machine learning or “Artificial Intelligence” is not always involved in data-mining strategies. In fact the most popular – and surprisingly profitable – data mining method works without any fancy neural networks or support vector machines. Continue reading “Build Better Strategies! Part 4: Machine Learning”

Hacker’s Tools

For performing our financial hacking experiments (and for earning the financial fruits of our labor) we need some software machinery for research, testing, training, and live trading financial algorithms. No existing software platform today is really up to all those tasks. So you have no choice but to put together your system from different software packages. Fortunately, two are normally sufficient. I’ll use Zorro and R for most articles on this blog, but will also occasionally look into other tools. Continue reading “Hacker’s Tools”