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prove why neural network will not work in trading
- Thread starter trend2009
- Start date
There are significant issues using Neural Networks for time series modeling (and trading)
Issues:
Issues:
- You need to have a sparse nn architecture (i.e. not have fully connected layers). This is because you cannot have future data impacting the weights / biases of older data. Unfortunately, you literally cannot use PyTorch if you want to do proper time series modeling because the sequential mask cannot handle sparse architecture (a silly design choice by the PyTorch team). Tensorflow also has pretty convoluted and messy ways of handling sparse matrix algebra.
- Time series modeling should be more concerned with looking at historical data (look at lagged series). In a nn this would require INTRA-layer connections as opposed to (or in addition to) INTER-layer connections. Intra-layer connections would provide directionality to the model, while it is not really present in traditional network architectures.
- For financial data, you have to transform the data before you feed it in. As previous posters said: garbage in, garbage out. For example, people typically look at the log returns of stock prices because it has nice mathematical properties.
- You have to remember that these models are optimization models. They are there to optimize the parameters, not to predict the future from seemingly random financial data.
- The only solution is to not use neural networks for this problem. The only time series applications that can work well with neural networks are problems involving stationary data. For example, weather data and unemployment rate data are stationary (cyclical), so a nn model would be extremely effective in finding an optimal model.
You are right, not only are you not an expert in his fields but you hardly know anything. Most of the claims you made are false and your reasoning is incoherent. Without going into details, you are simply wrong. I work in this space, it's even in my user name. I am glad the barriers of entry are still high but I expect that to change over time as more and more people experiment with sequence learning. But I doubt someone with a few online courses and less than 10 years of trading risk will break into this space.
I recommend you find your own niche where you have superior expertise and leave other fields to those who claim domain knowledge that is far superior to yours.
I recommend you find your own niche where you have superior expertise and leave other fields to those who claim domain knowledge that is far superior to yours.
I am not a neural network expert but have thought about using neural network in developing trading strategies for quite some time. in the end, I found it is almost an impossible task in terms of using times series data as input. the reasoning is quite simple. for example, suppose there are 100 ways to make a profit in the market, each of the 100 strategies corresponds to a specific context of the data points, e.g., double bottom, shoulder and header, breakout, pin bar, etc. if you input all the data points to the neural network, the NN system can not pick out any of the 100 strategies, since every strategy corresponds to one pattern, i.e., one specific set of parameters in NN, thus there are no parameter sets in NN which can distinguish those 100 patterns. if NN can not produce a set of parameters to categorize specifically each of those 100 patterns, they can not pick out any of the 100 strategies either.
for the above problem, genetic algorithm would be much easier to apply. NN is great if you have specified the search domain.
any opinions?
Let's assume 20% of the market participants are profitable. It could be lower than this figure. Are these 20% use neural network? Highly unlikely. So as high frequency. Since the beginning of the Market, is there any system that comes out as a winner consistently? As with any system, it's dependent on the inputs. Garbage in, garbage out. (Thebigshort has already use this statement. Sorry.) Maybe, I should ask this question. If a system that needs good input in order to get good results, is this a good system?
ROFLMAO who needs that?I worked with wealth labs neural network extension 10 years ago.
After 3 days of training it learned to buy every downtick and sell every uptick
Nope. A good system would be garbage in good results!Let's assume 20% of the market participants are profitable. It could be lower than this figure. Are these 20% use neural network? Highly unlikely. So as high frequency. Since the beginning of the Market, is there any system that comes out as a winner consistently? As with any system, it's dependent on the inputs. Garbage in, garbage out. (Thebigshort has already use this statement. Sorry.) Maybe, I should ask this question. If a system that needs good input in order to get good results, is this a good system?
.
You are right, not only are you not an expert in his fields but you hardly know anything. Most of the claims you made are false and your reasoning is incoherent. Without going into details, you are simply wrong. I work in this space, it's even in my user name. I am glad the barriers of entry are still high but I expect that to change over time as more and more people experiment with sequence learning. But I doubt someone with a few online courses and less than 10 years of trading risk will break into this space.
I recommend you find your own niche where you have superior expertise and leave other fields to those who claim domain knowledge that is far superior to yours.
have you found profitable strategy with NN?