Machine learning for financial prediction
There are a few problems with turning your laptop into a money machine using data analysis.<p>Remember the maxim, past performance is not a guarantee of future results.  You can develop strategies based on past data that will beat the market, but, the nature of markets is to adapt to kill your edge.  Markets adapt constantly and your edge stops working at an unknown point in time.  It&#x27;s unknowable when that WILL happen because past data can&#x27;t show that.<p>The other reason is transaction costs.  In gambling called vig.  Let&#x27;s say I&#x27;m betting NFL games.  NFL home teams win 51% of games.  Even flipping a coin I&#x27;ve read come up heads 50.1% of the time.  These are profitable systems.  But you&#x27;re paying the bookie 10% on each loss.  You could find someone to bet you on coin tosses and bet heads each time.  You have a positive expected return, although you need a huge number of flips to make money!<p>In trading of course costs is commissions.  Why do you think there was a rise in HFT?  The strategies are consistently profitable. (Besides the flashing&#x2F;manipulation tactics)  It is ONLY profitable because of extremely low commission costs that are not available to the retail (or even semi-professional) trader.<p>Systems that can pull $0.0001 out of every share traded overall on high volume can be (pretty easily) created, but you can&#x27;t trade them profitably. In fact, you will find commissions (semi-pros who pay about $3 per 1000 shares) priced right at the point of an edge you could be expected to develop.