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As a college undergrad (yes, I profess my status as a CS underling) doing a senior thesis in GA, I have read some papers on this GA's applied to trading. The di

by cowmoo 19y ago

As a college undergrad (yes, I profess my status as a CS underling) doing a senior thesis in GA, I have read some papers on this GA's applied to trading. The dirty secret that these papers do not tell you is that: genetic algorithms are quite stochastic, meaning that they can evolve quite varying quality of technical trading rules, depending on the mood of the CS God during any particular evolution trials. And these papers' results, in the interest of the authors who wrote them, will only tell you the best trial run that they have gotten - but the trouble is: out in the real world, judging your trading agent's performance is not by running hundreds of GA trials on historical stock data and publishing the best results; but you have gotta put your money where your GA technical rules tell you, whether the rules evolved are sub-optimal or not.

henning 19y ago
I spent a few months trying to go from "wow!" numbers in papers to something that I thought could be used for risking my own hard-earned money, and I failed. I think it's tilting at windmills unless you have the resources of Goldman Sachs or someone like that behind you. I know for a fact that some investment banks use these techniques; they just aren't using them to make a mechanical "trade/no-trade" decision. What Joe Schmoe on the street reading these papers is interested in is the possibility of lucrative personal trading. The papers ostensibly claim to instead be examining market efficiency. Consequently reading these papers is kind of disappointing. But, the reason I submitted the paper was its unorthodox approach which differs from most of the other literature on applying evolutionary computation to mechanical trading.
- maurycy 19y ago
  What you mean as "failed"? Even if you're bringing in stable (in sense of Sharpe ratio) returns above the standard interest rates, you've already succeed. I don't think it makes sense to play with your money unless you're very rich. Returns like 50% per year are quite unlikely in the longer run, yet very risky. Instead, consider starting a fund.
  - henning 19y ago
    The profit-loss patterns weren't good enough to be ready for real-life trading. I'd be much more willing to tinker with it if I could do it with someone else's money. The hedge fund motto is "other people's lives, other people's money."

by cowmoo 19y ago

henning 19y ago

I spent a few months trying to go from "wow!" numbers in papers to something that I thought could be used for risking my own hard-earned money, and I failed. I think it's tilting at windmills unless you have the resources of Goldman Sachs or someone like that behind you. I know for a fact that some investment banks use these techniques; they just aren't using them to make a mechanical "trade/no-trade" decision. What Joe Schmoe on the street reading these papers is interested in is the possibility of lucrative personal trading. The papers ostensibly claim to instead be examining market efficiency. Consequently reading these papers is kind of disappointing. But, the reason I submitted the paper was its unorthodox approach which differs from most of the other literature on applying evolutionary computation to mechanical trading.

maurycy 19y ago
What you mean as "failed"? Even if you're bringing in stable (in sense of Sharpe ratio) returns above the standard interest rates, you've already succeed. I don't think it makes sense to play with your money unless you're very rich. Returns like 50% per year are quite unlikely in the longer run, yet very risky. Instead, consider starting a fund.
- henning 19y ago
  The profit-loss patterns weren't good enough to be ready for real-life trading. I'd be much more willing to tinker with it if I could do it with someone else's money. The hedge fund motto is "other people's lives, other people's money."