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Using a Keras Long Short-Term Memory Model to Predict Stock Prices

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Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#31

Post by gonehome »

fredliu wrote: post #25

Total noob question in this space (algotrading with DL algorithms). What DL is good at, is to automate tasks that are easy for humans (e.g. telling cat from dog, understand a sentence from sound wave, translation, etc) but hard for machines without DL. Now, if a task is even hard/borderline impossible for humans to achieve (e.g. predicting stock market with higher accuracy and consistency), why would we believe DL co…

DL isn’t just good at automating human tasks (see AlphaZero and AlphaGo).

It can be used to recognize patterns and train to solve problems better than humans. Though in this case since the market is people making predictions about a prediction I’m not sure how much it’d help.

There’s probably something about humans using a rough estimate of what the stock has been historically to inform where it could go though so it’s value is probably non-zero.

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#32

Post by rl3 »

fredliu wrote: post #25

Total noob question in this space (algotrading with DL algorithms). What DL is good at, is to automate tasks that are easy for humans (e.g. telling cat from dog, understand a sentence from sound wave, translation, etc) but hard for machines without DL. Now, if a task is even hard/borderline impossible for humans to achieve (e.g. predicting stock market with higher accuracy and consistency), why would we believe DL co…

Because there's no requirement that deep learning must only excel at tasks humans are good at.

That said, the pitfalls of using ML in trading systems are numerous.

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#35

Post by everdev »

DevX101 wrote: post #26

I'm not a purist believer in the efficient market hypothesis. BUT, I doubt there's much alpha to be gained simply from looking at price data which is widely and publicly available. Also keep in mind that markets are dynamic feedback loops so even if this model had an edge, the act of publishing this article would work against you to neutralize that edge in the future. There's a good reason the most successful 'quanti…

These predictions can also be self-reenforcing. If enough money believes the model is accurate, it will create it's own market conditions. In a distopian AI stock prediction world the best model will be the one with the widest publicity and adoption, not the best data points.

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#36

Post by zugweg »

fredliu wrote: post #25

Total noob question in this space (algotrading with DL algorithms). What DL is good at, is to automate tasks that are easy for humans (e.g. telling cat from dog, understand a sentence from sound wave, translation, etc) but hard for machines without DL. Now, if a task is even hard/borderline impossible for humans to achieve (e.g. predicting stock market with higher accuracy and consistency), why would we believe DL co…

I think relating DL with human skills is confusing you. DL already beats humans in recognizing dog breeds. DL could always do a better job, because it looks at more patterns than humanly possible.

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#37

Post by a-afterglow »

fredliu wrote: post #25

Total noob question in this space (algotrading with DL algorithms). What DL is good at, is to automate tasks that are easy for humans (e.g. telling cat from dog, understand a sentence from sound wave, translation, etc) but hard for machines without DL. Now, if a task is even hard/borderline impossible for humans to achieve (e.g. predicting stock market with higher accuracy and consistency), why would we believe DL co…

To get rid of the human, maybe? If both machine and human achieve similar results, and the machine can do it quicker and cost less, it's still a win.

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#38

Post by a9entroy »

SEJeff wrote: post #29
DevX101 wrote: post #26

I'm not a purist believer in the efficient market hypothesis. BUT, I doubt there's much alpha to be gained simply from looking at price data which is widely and publicly available. Also keep in mind that markets are dynamic feedback loops so even if this model had an edge, the act of publishing this article would work against you to neutralize that edge in the future. There's a good reason the most successful 'quanti…

Rennaisance is one large quantitative trading firm, there are other bigger and more successful ones however. I happen to work for another very large and successful quant trading firm.

Which company would that be?

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#39

Post by steve19 »

DevX101 wrote: post #26

I'm not a purist believer in the efficient market hypothesis. BUT, I doubt there's much alpha to be gained simply from looking at price data which is widely and publicly available. Also keep in mind that markets are dynamic feedback loops so even if this model had an edge, the act of publishing this article would work against you to neutralize that edge in the future. There's a good reason the most successful 'quanti…

How does a lifetime non-compete work?

Re: Using a Keras Long Short-Term Memory Model to Predict Stock Prices

#40

Post by docker_up »

These predictions and models work until they don't. And when they don't, they blow up in spectacular fashion.

Look at Long Term Capital Management. It had big names behind it and the model/strategy made a lot of money, until I believe the Russian bond crisis caused the markets to act irrationally. Then everything they had invested in quickly went down the toilet, and it was big enough to almost cause a financial crisis.

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