Machine Learning (journal) (Photo credit: Wikipedia ) Machine learning algorithms can get complicated really quickly. I have been fooling around with some small tests and finally decided I would try to implement a forex trading strategy using machine learning, while keeping things as simple as possible (,but not simpler, as Einstein said). So as an exercise and exploration of the possibilities I decided to turn the most simple moving average cross over mean reversion trading strategy into a machine learning trading algorithm. Moving average cross over strategies are fairly commonly used in trading mostly in conjunction with some other technical indicator and a lot of trader discretion. Trader discretion is needed to decide when to trade the strategy and when NOT to trade the strategy all depending on the market conditions. I have been back testing many strategies and most strategies clearly have profitable periods as well as losing periods. There are always some optimal paramete
Showing posts from December, 2013
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I have been reading two books about quantative and algorithmic trading by Ernie Chan: Quantitative Trading: How to Build Your Own... Algorithmic Trading: Winning Strategies and... See the books page for my reading recommendations. One of the main take aways of this reading is the insight that it is possible to create stationary pairs by shorting and longing two, or more equities that usually move in tandem. The idea is to arbitrage the oscillating differences in moves between the equities in the pairs. Mr Chan explains all the mathematics behind mean reversion and provides Matlab code do the necessary calculus.