Building AI Trading Systems
Writing ai trading systems is the coding I do for fun since 2012. I&#x27;m a little under break even so far but I keep at it because find it so interesting. Since I started every single week I have learned a new way of thinking about a problem I encountered or a new approach to problems that still stand in my way.<p>Questions like, how do you choose a stoploss? Well you can pick it statistically based on history or you can use a supervised label. You can even use stock A calculated stoploss to pick the stoploss you use on stock B because you found a condition under which those two stocks became almost identicall correlated. How do you want to pick the supervised label? You can do spectral analysis to pick the stoploss too. You can use sentiment as a stoploss, source from google news or twitter or stocktwits.<p>It doesn&#x27;t have to be, &#x27;well I measured the average profitable stoploss to use over the last 10 years across all stocks and that isn&#x27;t working so I quit&#x27;<p>Things like that, you get to fit the ideas together and then test them in the real world.<p>There are some things I would like to share.<p>1. Just because you have a good forecast doesn&#x27;t translate into cash. It has to be paired with a trading strategy. This is probably why the author thinks the answer is RL, because coincidentally if you approach this problem with RL, it does the forecasting + strategy.<p>2. I have measured a correlation between heavier processing(using a higher big O) and better out of sample performance.<p>The criticisms with the NN approach like non stationary data have obvious solutions that a &#x27;by the book&#x27; trading approach + ml approach don&#x27;t really teach beginners so they dismiss it.<p>It is my belief right now that there are people who are prepping data from sources like iextrading then using things like sagemaker to develop good enough forecasting and combining it with a statistics+rules based trading strategy to make living wages.<p>That said, I have 5k account size for my NN obsessions, and my 401k is &#x27;by the book&#x27;.<p>person_of_color is totally right when he says it is a Moby Dick of programming.