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Art project: Train rats to trade markets

artmarcovici.com

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Re: Art project: Train rats to trade markets

#11

Post by digitailor »

bayesianhorse wrote: post #7
digitailor wrote: post #5

Earlier quoted context omitted.

Wasn't the point that the rats only reacted the the live feed, and didn't have any ancillary data? That ticker tracks converted to sound were enough to perform strikingly well in terms of deciding holding moves? ...the training was almost finished; the performances of the top 4 rats had turned out to be comparable to those of the world' s best fund managers. Their ability to recognize sound patterns generated from th…

A random number generator outperforms most fund managers...

Indeed, a chimpanzee was actually the top performer in 1999, by throwing darts at ticker pages. Bad year for the market.

http://www.marketwatch.com/story/paul-farrells-commentary-ch...

http://www.dailyfinance.com/2011/08/03/in-honor-of-planet-of...

Re: Art project: Train rats to trade markets

#13

Post by jackgavigan »

I seem to recall that the most likely predictor of whether the next tick in a liquid market will be up or down, is whether the last tick was up or down.

In other words, if the last tick was upwards, there is a >50% chance that the next tick will be upwards too.

A quick'n'dirty Google search turned up some research: http://www.researchgate.net/publication/234834258_Random_Wal...

Looking at the ticker tracks the artist has used, I wouldn't be surprised if the rats are effectively being trained to Buy when they hear high-pitched notes, and Sell when they hear low-pitched ones.

Re: Art project: Train rats to trade markets

#16

Post by throwaway283719 »

jackgavigan wrote: post #13

I seem to recall that the most likely predictor of whether the next tick in a liquid market will be up or down, is whether the last tick was up or down. In other words, if the last tick was upwards, there is a >50% chance that the next tick will be upwards too. A quick'n'dirty Google search turned up some research: http://www.researchgate.net/publication/234834258_Random_Wal... Looking at the ticker tracks the artist…

It's actually the other way around. For most stocks, if the last tick was upwards, the next tick is more likely to be downwards (where a "tick" is any time the best bid or ask moves, and "price movement" means the change in the mid price).

For example, taking a random stock over a random three month time period, I compute that after an uptick, the probabilities for the next tick are -

  P(uptick)    = 39.3%
  P(downtick)  = 56.3%
  P(no change) =  4.4%
where "no change" typically happens when the best bid and ask change by the same magnitude, but in opposite directions.

Of course, this is not very useful for trading, because it doesn't give you enough of an edge to overcome the bid-ask spread.

Re: Art project: Train rats to trade markets

#17

Post by [deleted] »

jackgavigan wrote: post #13

I seem to recall that the most likely predictor of whether the next tick in a liquid market will be up or down, is whether the last tick was up or down. In other words, if the last tick was upwards, there is a >50% chance that the next tick will be upwards too. A quick'n'dirty Google search turned up some research: http://www.researchgate.net/publication/234834258_Random_Wal... Looking at the ticker tracks the artist…

[deleted]

Re: Art project: Train rats to trade markets

#18

Post by [deleted] »

throwaway283719 wrote: post #16
jackgavigan wrote: post #13

I seem to recall that the most likely predictor of whether the next tick in a liquid market will be up or down, is whether the last tick was up or down. In other words, if the last tick was upwards, there is a >50% chance that the next tick will be upwards too. A quick'n'dirty Google search turned up some research: http://www.researchgate.net/publication/234834258_Random_Wal... Looking at the ticker tracks the artist…

It's actually the other way around. For most stocks, if the last tick was upwards, the next tick is more likely to be downwards (where a "tick" is any time the best bid or ask moves, and "price movement" means the change in the mid price). For example, taking a random stock over a random three month time period, I compute that after an uptick, the probabilities for the next tick are - P(uptick) = 39.3% P(downtick) =…

[deleted]

Re: Art project: Train rats to trade markets

#19

Post by throwaway283719 »

digitailor wrote: post #5
lmm wrote: post #4

Earlier quoted context omitted.

"AI" is not a single thing. There are some projects that you train to respond to signals, sure. Some of them are already in use in HFT. Modern trading tends to use a lot more inputs than just the historic price though - you also look at wire services, twitter, etc. So I wouldn't expect this to be competitive without having access to more data.

Wasn't the point that the rats only reacted the the live feed, and didn't have any ancillary data? That ticker tracks converted to sound were enough to perform strikingly well in terms of deciding holding moves? ...the training was almost finished; the performances of the top 4 rats had turned out to be comparable to those of the world' s best fund managers. Their ability to recognize sound patterns generated from th…

I should point out that it's not at all surprising that the "top 4" rats performed very well. If you got a couple of hundred people, animals, or random number generators to trade using any set of rules you like, and then looked at the top 4, you would almost always find that they outperform, because that's what being in the top 4 means!

The real question is whether the same four rats would be the outperformers if you ran the experiment again.

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