by Qian Zhu and Tom Starke If you want to learn about things deeply, you need to break them. Sharpe Ratio is one of the top metrics used by traders and investors to evaluate their trading strategy/investment systems. It is often referred to as the ‘risk-adjusted performance measures’, which gives confidence to investors by comparing…
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Note: the following post is purely to illustrate how to avoid pitfalls in trading. My motivation for this post was to give an example of mistakes that I have made myself all too often and I can fully appreciate how one would come to those conclusions. I’m sure that the authors are excellent in machine…
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In the previous post we plotted a response surface of our strategy parameters and their PnL in order to assess if our choice of parameters is rational and not just a local maxima, which rapidly drops off as we move away from it. In this section we investigate how we can use machine learning to…
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In the last section we looked at bootstrapping by random sampling one of our best strategy PnL curves in order to determine how stable and reliable the returns are. In this section we will look at the response surface of the returns, that is the PnL with respect to the underlying parameters. In our case…
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In the last section we investigated how the strategies we’ve selected from our train-test cluster were distributed in the parameter plot. We saw that they form a dense cluster in that plot which indicates that the PnL’s we see are not a result of overfitting since we would expect them to be more randomly distributed.…
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Dr Tom Starke will give a presentation on the 29 Sept with the title: Demonstration of Machine-Learning Based Strategy Parameter Selection in Python Abstract System Parameter Permutation (SPP) has been a hot topic in quantitative trading in the past few years. However, for most people this is still quite an abstract concept that is challenging…
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Dr Tom Starke and Michelle Lin will be running the Quantopian Advanced workshop on 16 Sept 2017. Here are some information on it. For more information, please follow the link. Cross-sectional factor modeling is widely accepted by academics and industry practitioners alike as a general and consistent way to model and understand equity markets. We…
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This is an old video that I produced sitting on my bed in the morning in order to learn how to make basic Youtube videos. Nevertheless, I became quite popular. I apologise for looking a bit rough. Hope you enjoy it regardless. Here is the code: If that seems a bit complex, check out the…
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In the previous post we used unsupervised machine learning to identify the best cluster of train-test results. The question is: is that cluster meaningful? If the parameters of the moving averages for the cluster are scattered evenly over the parameter space, this cluster may not be very meaningful. On the other hand, if the parameters…
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In the previous section we ran a parameter sweep over the train and the test set of our strategy and looked at the average PnL. In this post we will start with system parameter permutation (SPP) in order to improve the performance of our system without falling prey to data mining bias. Remember that we…
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