Registered: May 2005
Posts: 1466

People look at Neural networks wrong. They are a powerful tool to improve a trading strategy. They should not be the core of the strategy. One example would be developing a system which uses MACD. If you find a profitable and robust strategy you could use a neural network to predict the MACD a few bars in the future and then replace the original one.

This approach is the best way I have found to use neural networks as a component in a strategy and not the strategy themselves.

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Registered: Jul 2004
Posts: 1773

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Quote from pandabear:


1. Do consistently profitable mechanical trading systems exists? (I am sure they do but does anyone here run one?)
2. What more profitable for the longer term? Mechanical or a neural system?

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Registered: Apr 2001
Posts: 1555

The biggest problem with Neural Networks in general is that they have very large degrees of freedom. In other words, you can train it to produce just about anything on historical data, without it having *any* predictive value.

I have found that NN and general evolutionary algorithms are very well suited for specialized optimizations, where you e.g. want to explore a huge parameter space to get some sense of where "good" value exits. I have not found working NN systems built just on training a network without a strong underlying model already being present.

Registered: Nov 2002
Posts: 6440

The most powerful computers are the ones between our ears. They aren't very fast but hey... I recommend developing some ideas and trading them live, maybe with a simulated account, as an adjunct to any other kind of development you do. You will see things and learn things doing that.

I was able to move from live trading, which I really am not good at or keen on, to semi automation where the computer was a useful helper, now I'm looking a little further down the road to where I can offload more to the computer and free myself up to do the discretionary work with better focus... I can't envision the day when the computer teaches me much of anything or does all the trading, it could backtest some stuff and improve on it, that is the most it can do in it's current state...

Registered: Jun 2004
Posts: 1980

It's simpler...

Most people just stick a NN or Computer Learning logic and lose control over it.

It's a necessity for a system developer to have clarity over what's going on with their trades.

Blindly using NN or any tool without any understanding / control is only increasing your risk of trading.

Registered: Oct 2006
Posts: 572

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Quote from pandabear:

1. Do consistently profitable mechanical trading systems exists? (I am sure they do but does anyone here run one?)
2. What more profitable for the longer term? Mechanical or a neural system?

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