Statistically sound machine learning for algorithmic trading of financial instruments PDF
Preview Statistically sound machine learning for algorithmic trading of financial instruments
Great effort has been undertaken to ensure that the content of this book, as well as the TSSB program, are correct. However, errors and omissions are impossible to avoid in a work of this extent. Neither this book nor the TSSB program are meant as providing professional advice. No guarantee is made that these items are free of errors and omissions, and the reader assumes full liability for any losses associated with use of these items. About this book: This is a tutorial, with instruction organized from easy to sophisticated. If the reader just skims through the entire text, hoping to gain an idea of how to use the TSSB program, the reader will be hopelessly dismayed by the vast complexity of options. The correct approach is to begin with the first, very simple example and implement it. Then progress to the next, and so forth. Each example builds on experience gained from prior examples. In this way, the reader will painlessly become familiar with the program. The TSSB program may be downloaded (free) from the TSSB website: http://tssbsoftware.com/ Copyright © 2013 David Aronson and TimothyMasters All rights reserved ISBN 978-1489507716 About David Aronson David Aronson is a pioneer in machine learning and nonlinear trading system development and signal boosting/filtering. He has worked in this field since 1979. His accomplishments include: • Started Raden Research Group in 1982 where he oversaw the development of PRISM (Pattern Recognition Information Synthesis Modeling). • Chartered Market Technician certified byTheMarket Technicians Association since 1992. • Proprietary equities trader for Spear, Leeds and Kellogg 1997 – 2002. • Was an Adjunct Professor of Finance, teaching a graduate level course in technical analysis, data mining and predictive analytics to MBA and financial engineering students from 2002 to 2011. • Author of “Evidence Based Technical Analysis” published by John Wiley & Sons 2006. This was the first popular book to deal with data mining bias and the Monte Carlo Permutation Method for generating bias-free p- values. • Co-designer of TSSB (Trading System Synthesis and Boosting), a software platform for the automated development of statistically sound predictive- model-based trading systems. • Developed a method for indicator purification and Pure VIX. • Innovated the concept of signal boosting: using machine learning to enhance the performance of existing strategies. About Timothy Masters Timothy Masters received a PhD in mathematical statistics with a specialization in numerical computing. Since then he has continuously worked as a consultant for government and industry. • Early research involved automated feature detection in high-altitude photographs while developing applications for flood and drought prediction, detection of hidden missile silos, and identification of threatening military vehicles. • Worked with medical researchers in the development of computer algorithms for distinguishing between benign and malignant cells in needle biopsies. • Current focus is methods for evaluating automated financial market trading systems. • Authored five books on prediction, classification, and applications of neural networks: Practical Neural Network Recipes in C++ (Academic Press, 1993) Signal and Image Processing with Neural Networks (Wiley, 1994) Advanced Algorithms for Neural Networks (Wiley, 1995) Neural, Novel, and Hybrid Algorithms for Time Series Prediction (Wiley, 1995) Assessing and Improving Prediction and Classification (CreateSpace, 2013) More information can be found on the author's website: TimothyMasters.info Table of Contents Introduction Two Approaches to Automated Trading Predictive Modeling Indicators and Targets Converting Predictions to Trade Decisions Testing the Trading System Walkforward Testing Cross Validation Overlap Considerations Performance Criteria Model Performance Versus Financial Performance Financial Relevance and Generalizability Performance Statistics in TSSB Desirable Program Features A Simple Standalone Trading System The Script File The Audit Log A Walkforward Fold Out-of-Sample Results for This Fold The Walkforward Summary A Simple Filter System The Trade File The Script File The Audit Log Out-of-Sample Results for This Fold The Walkforward Summary Common Initial Commands Market Price Histories and Variables Quick Reference to Initial Commands Detailed Descriptions INTRADAY BY MINUTE INTRADAY BY SECOND MARKET DATE FORMAT YYMMDD MARKET DATE FORMAT M_D_YYYY MARKET DATE FORMAT AUTOMATIC REMOVE ZERO VOLUME READ MARKET LIST READ MARKET HISTORIES MARKET SCAN RETAIN YEARS RETAIN MOD CLEAN RAW DATA INDEX READ VARIABLE LIST OUTLIER SCAN DESCRIBE CROSS MARKET AD CROSS MARKET KL CROSS MARKET IQ STATIONARITY A Final Example Reading and Writing Databases Quick Reference to Database Commands Detailed Descriptions RETAIN MARKET LIST VARIABLE IS TEXT WRITE DATABASE READ DATABASE READ UNORDERED DATABASE APPEND DATABASE IS PROFIT A Saving/Restoring Example Creating Variables Overview and Basic Syntax Index Markets and Derived Variables An Example of IS INDEX and MINUS INDEX Multiple Indices Historical Adjustment to Improve Stationarity Centering Scaling Normalization An Example of Centering, Scaling, and Normalization Cross-Market Normalization Pooled Variables MEDIAN pooling CLUMP60 Pooling Mahalanobis Distance Absorption Ratio Trend Indicators MA DIFFERENCE ShortLength LongLength Lag LINEAR PER ATR HistLength ATRlength QUADRATIC PER ATR HistLength ATRlength CUBIC PER ATR HistLength ATRlength RSI HistLength STOCHASTIC K HistLength STOCHASTIC D HistLength PRICE MOMENTUM HistLength StdDevLength ADX HistLength MIN ADX HistLength MinLength RESIDUAL MIN ADX HistLength MinLength MAX ADX HistLength MaxLength RESIDUAL MAX ADX HistLength MaxLength DELTA ADX HistLength DeltaLength ACCEL ADX HistLength DeltaLength INTRADAY INTENSITY HistLength DELTA INTRADAY INTENSITY HistLength DeltaLength REACTIVITY HistLength DELTA REACTIVITY HistLength DeltaDist MIN REACTIVITY HistLength Dist MAX REACTIVITY HistLength Dist Trend-Like Indicators CLOSE TO CLOSE N DAY HIGH HistLength N DAY LOW HistLength Deviations from Trend CLOSE MINUS MOVING AVERAGE HistLen ATRlen LINEAR DEVIATION HistLength QUADRATIC DEVIATION HistLength CUBIC DEVIATION HistLength DETRENDED RSI DetrendedLength DetrenderLength Lookback Volatility Indicators ABS PRICE CHANGE OSCILLATOR ShortLen Multiplier PRICE VARIANCE RATIO HistLength Multiplier MIN PRICE VARIANCE RATIO HistLen Mult Mlength CHANGE VARIANCE RATIO HistLength Multiplier MIN CHANGE VARIANCE RATIO HistLen Mult Mlen ATR RATIO HistLength Multiplier DELTA PRICE VARIANCE RATIO HistLength Multiplier DELTA CHANGE VARIANCE RATIO HistLength Multiplier DELTA ATR RATIO HistLength Multiplier BOLLINGER WIDTH HistLength DELTA BOLLINGER WIDTH HistLength DeltaLength N DAY NARROWER HistLength N DAY WIDER HistLength Indicators Involving Indices INDEX CORRELATION HistLength DELTA INDEX CORRELATION HistLength DeltaLength DEVIATION FROM INDEX FIT HistLength MovAvgLength PURIFIED INDEX Norm HistLen Npred Nfam Nlooks Look1 Basic Price Distribution Statistics PRICE SKEWNESS HistLength Multiplier CHANGE SKEWNESS HistLength Multiplier PRICE KURTOSIS HistLength Multiplier CHANGE KURTOSIS HistLength Multiplier DELTA PRICE SKEWNESS HistLen Multiplier DeltaLen DELTA CHANGE SKEWNESS HistLen Multiplier DeltaLen DELTA PRICE KURTOSIS HistLen Multiplier DeltaLen DELTA CHANGE KURTOSIS HistLen Multiplier DeltaLen Indicators That Significantly Involve Volume VOLUME MOMENTUM HistLength Multiplier DELTA VOLUME MOMENTUM HistLen Multiplier DeltaLen VOLUME WEIGHTED MA OVER MA HistLength DIFF VOLUME WEIGHTED MA OVER MA ShortDist LongDist PRICE VOLUME FIT HistLength DIFF PRICE VOLUME FIT ShortDist LongDist DELTA PRICE VOLUME FIT HistLength DeltaDist ON BALANCE VOLUME HistLength DELTA ON BALANCE VOLUME HistLength DeltaDist POSITIVE VOLUME INDICATOR HistLength DELTA POSITIVE VOLUME INDICATOR HistLen DeltaDist NEGATIVE VOLUME INDICATOR HistLength DELTA NEGATIVE VOLUME INDICATOR HistLen DeltaDist PRODUCT PRICE VOLUME HistLength SUM PRICE VOLUME HistLength DELTA PRODUCT PRICE VOLUME HistLen DeltaDist DELTA SUM PRICE VOLUME HistLen DeltaDist Entropy and Mutual Information Indicators PRICE ENTROPY WordLength VOLUME ENTROPY WordLength PRICE MUTUAL INFORMATION WordLength VOLUME MUTUAL INFORMATION WordLength Indicators Based on Wavelets REAL MORLET Period REAL DIFF MORLET Period REAL PRODUCT MORLET Period IMAG MORLET Period IMAG DIFF MORLET Period IMAG PRODUCT MORLET Period PHASE MORLET Period DAUB MEAN HistLength Level DAUB MIN HistLength Level DAUB MAX HistLength Level DAUB STD HistLength Level DAUB ENERGY HistLength Level DAUB NL ENERGY HistLength Level DAUB CURVE HistLength Level Follow-Through-Index (FTI) Indicators Low-Pass Filtering and FTI Computation Block Size and Channels Essential Parameters for FTI calculation Computing FTI Automated Choice of Filter Period Trends Within Trends FTI Indicators Available in TSSB
Description:The list of books you might like
