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Building AI Trading Systems

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Re: Building AI Trading Systems

#91

Post by nv-vn »

smabie wrote: post #77
nv-vn wrote: post #62

Earlier quoted context omitted.

I mentioned the idea of adjusting for risk in the GP post, though you are correct that I didn't call out any specific measure like the Sharpe ratio by name. If your risk-adjusted returns are worse than S&P 500 then obviously leverage isn't going to fix that problem. Simply put, I don't think OP's strategy really has any of these desirable features like a good sharpe, market neutrality, low exposure, etc. I think OP i…

I guess all I'm saying is that a strategy that has a worse Sharpe ratio than the market but zero correlation could still be valuable to a lot of investors for the same reason that sometimes it makes sense to add a asset to your portfolio that lowers your expected return. It's possible that that one strategy with the worse Sharpe ratio when combined with your pure beta investments would yield a portfolio with a better…

That's an interesting point that I didn't really consider. Thanks!

Re: Building AI Trading Systems

#92

Post by perl4ever »

steephills wrote: post #84
DSingularity wrote: post #81

Earlier quoted context omitted.

He was using that as a simple example.

Yes, I just wanted to make a point: things that have names, that have a paper written about them, that have Wikipedia pages or even Nobel prices attached to them are in the same category. The market has priced them in decades ago. Thinking you can read Fama papers to take on quant funds, like smabie is claiming at several places in this thread, is like reading Commodore manuals to take on AlphaGo.

I feel like I've read something recently about how there's evidence people don't actually read SEC filings.

It's kind of like the theory that open source doesn't have serious bugs because so many people read it.

You know the saying that the market can remain irrational longer than you can remain solvent? If some people don't care about doing simple analysis, and others assume that someone else is doing it, and still others accept that it's useless to do it if other people aren't, it seems like a none-too-efficient market can be a stable equilibrium.

Re: Building AI Trading Systems

#93

Post by defertoreptar »

Erlich_Bachman wrote: post #78
anonu wrote: post #37

Just a reminder: nobody ever wrote about their super successful trading strategy. Its just never happened. If you have the wherewithal to research and build a trading system that works, then you're smart enough to know that the moment you reveal your edge to the world - it disappears. Even if you dont discuss the innards of your strategy, but you talk about your process or the system youre strategy is built on, you'v…

This is a simplified version of the truth. There is a lot of information that you can safely share because the number of people that will know where to look for it, know how to implement it, what to even do with it, how not to make any one of 100possible stupid mistakes while implementing it - is very low. Example in point: Warren Buffet. All of his process is public knowledge, he constantly writes and talks about it…

Not exactly. We know the broad strokes. He figures a price for a company by estimating their lifetime earnings and then factoring in the time value of money. He's talked about a mental checklist he goes through when looking at quarterly reports, but he never talks about the exact details of this process. Whether he's lost his edge, that's debatable too. The time since he's beaten the S&P is now entering into the long-term.

Re: Building AI Trading Systems

#94

Post by tsss »

1799 wrote: post #33
darkteflon wrote: post #32

Earlier quoted context omitted.

Friend, if you are up on Hackernews making comments like this, I can guarantee with near 100% certainty that you are not capable of sustained outperformance in the markets. Whether you realise it now, later or never is no skin off my nose, but sooner would be cheaper. Comments like this are why these "beat-the-market" threads are evergreen on HN. They do a disservice to the community.

I'm really glad these sort of comments were made around 2013 on this community and I started trading cryptocurrency. His comments make sense to me, and I can guarantee you with near 100% certainty there is another millionaire trader reading this thread.

You are as dumb as you are lucky and this comment is just the definition of survivorship bias. There are always some people who make money off of pyramid schemes (not necessarily saying that bitcoin is one) but that doesn't mean it was at any time at all a good idea to invest in one.

Real estate is another area that is very typical for bubbles and when the bubble bursts the large majority of people who are overleveraged will be eaten alive by the big investers (much bigger than you) who make money off the poor in times of crisis like they always do.

Re: Building AI Trading Systems

#96

Post by tatrajim »

wavepruner wrote: post #11
henning wrote: post #9

I tried doing some forecasting with various neural network models after assembling what I thought was a good amount of forex data. The neural net (I tried various architectures) couldn't do any better than chance. After playing around with it and trying to double-check everything, that was as far as I could get. This puts me ahead of most traders, since most of them lose money, then quit. This makes me wonder what ki…

You need more data to input besides just the price time-series. Successful human traders balance and synthesize a myriad of data sources to make decisions. I depend on an in-depth understanding of human psychology as one of my data sources. You can't turn something like that into data and input to a model. It is something learned through life experience and study.

Personally over the past few decades investing in US equities, I have found arbitraging information found in Asian-language tech sites and real-world locations such as Shenzhen surprisingly profitable. My best example was a tip I garnered in 2011 from a Beijing KO employee brandishing her new iPhone 4. When I idly asked her if other employees in the huge KO (hundreds of staff) had iPhones, she offhandedly exclaimed 我们都有！ ("we all have them"). That moment set me up for a very comfortable retirement.

Re: Building AI Trading Systems

#97

Post by [deleted] »

henning wrote: post #9

I tried doing some forecasting with various neural network models after assembling what I thought was a good amount of forex data. The neural net (I tried various architectures) couldn't do any better than chance. After playing around with it and trying to double-check everything, that was as far as I could get. This puts me ahead of most traders, since most of them lose money, then quit. This makes me wonder what ki…

[deleted]

Re: Building AI Trading Systems

#98

Post by bobbiechen »

perl4ever wrote: post #92
steephills wrote: post #84

Earlier quoted context omitted.

Yes, I just wanted to make a point: things that have names, that have a paper written about them, that have Wikipedia pages or even Nobel prices attached to them are in the same category. The market has priced them in decades ago. Thinking you can read Fama papers to take on quant funds, like smabie is claiming at several places in this thread, is like reading Commodore manuals to take on AlphaGo.

I feel like I've read something recently about how there's evidence people don't actually read SEC filings. It's kind of like the theory that open source doesn't have serious bugs because so many people read it. You know the saying that the market can remain irrational longer than you can remain solvent? If some people don't care about doing simple analysis, and others assume that someone else is doing it, and still…

Similarly, the book The Big Short (Michael Lewis) notes that hedge fund manager Michael Burry read hundreds of prospectuses for mortgage bonds in the years leading up to 2008 and was "certain even then [in 2005] (and dead certain later) that he was the only human being on earth who read them, apart from the lawyers who drafted them." He ended up shorting these and profiting hundreds of millions of dollars.

Re: Building AI Trading Systems

#99

Post by michaf »

tcgv wrote: post #69
henning wrote: post #9

I tried doing some forecasting with various neural network models after assembling what I thought was a good amount of forex data. The neural net (I tried various architectures) couldn't do any better than chance. After playing around with it and trying to double-check everything, that was as far as I could get. This puts me ahead of most traders, since most of them lose money, then quit. This makes me wonder what ki…

> since some kind of autoregressive time series forecasting system seems pretty unreliable. A few months ago I tried to evaluate autoregressive behavior in stock returns. To my surprise it seemed strong on some periods, but then weak on others [1], and as you said not reliable enough to rely on. My impression is that a lot more information aggregation and processing is required to obtain a sustainable edge worth tran…

There must be some information content left in stock price time series data, as evidenced e.g. by the price Momentum factor [1], which was been replicated in a number of studies (e.g. [2]), observable over the last couple of decades.

[1] https://en.wikipedia.org/wiki/Momentum_investing

[2] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2961979

Re: Building AI Trading Systems

#100

Post by DoctorOetker »

I would love to try trading as a hobby with a little side money, but I would abhor a hobby that reduces to effectively buying the trader-feel-good experience, where you're essentially sponsoring incumbents as a fanboy chipping in his pocket money.

What I would require from a trading platform:

1) decentralized and permissionless 2) provably fair trading

With 'provably fair trading' I mean the protocol should be such that I can prove you are not simply held captive by an intermediary, regardless in what shape or form. It should also be fair with respect to latency.

For example consider a trading market where token X can be exchanged for token Y and vice versa. Each holder of X demands her minimum of Y per X, and each holder of Y demands his minimum of X per Y. What if everyone salty hashed their demands, and pays the market contract (proportional to how much they will actually be allowed to trade) to register their salted hash. When the round has closed, people reveal their salt and plaintext, and the incompatible trading offers get their money back (minus a usage fee perhaps). The compatible ones can have their trades go through at the rate of 'total compatible X offered' to 'total compatible Y offered' (or some variation thereof, say rewarding those that helped close the gap). In this way there is no high frequency trading, and you could have a family of such markets operating at different timescales...

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