GA-MSSR: Genetic Algorithm Maximizing Sharpe and Sterling Ratio Method for RoboTrading

Zezheng Zhang and Matloob Khushi

Papers from arXiv.org

Abstract: Foreign exchange is the largest financial market in the world, and it is also one of the most volatile markets. Technical analysis plays an important role in the forex market and trading algorithms are designed utilizing machine learning techniques. Most literature used historical price information and technical indicators for training. However, the noisy nature of the market affects the consistency and profitability of the algorithms. To address this problem, we designed trading rule features that are derived from technical indicators and trading rules. The parameters of technical indicators are optimized to maximize trading performance. We also proposed a novel cost function that computes the risk-adjusted return, Sharpe and Sterling Ratio (SSR), in an effort to reduce the variance and the magnitude of drawdowns. An automatic robotic trading (RoboTrading) strategy is designed with the proposed Genetic Algorithm Maximizing Sharpe and Sterling Ratio model (GA-MSSR) model. The experiment was conducted on intraday data of 6 major currency pairs from 2018 to 2019. The results consistently showed significant positive returns and the performance of the trading system is superior using the optimized rule-based features. The highest return obtained was 320% annually using 5-minute AUDUSD currency pair. Besides, the proposed model achieves the best performance on risk factors, including maximum drawdowns and variance in return, comparing to benchmark models. The code can be accessed at https://github.com/zzzac/rule-based-forextrading-system

Date: 2020-08
New Economics Papers: this item is included in nep-big and nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in IJCNN 2020

Downloads: (external link)
http://arxiv.org/pdf/2008.09471 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2008.09471

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().