A Novel Deep Reinforcement Learning Based Automated Stock Trading System Using Cascaded LSTM Networks

Jie Zou, Jiashu Lou, Baohua Wang and Sixue Liu

Papers from arXiv.org

Abstract: More and more stock trading strategies are constructed using deep reinforcement learning (DRL) algorithms, but DRL methods originally widely used in the gaming community are not directly adaptable to financial data with low signal-to-noise ratios and unevenness, and thus suffer from performance shortcomings. In this paper, to capture the hidden information, we propose a DRL based stock trading system using cascaded LSTM, which first uses LSTM to extract the time-series features from stock daily data, and then the features extracted are fed to the agent for training, while the strategy functions in reinforcement learning also use another LSTM for training. Experiments in DJI in the US market and SSE50 in the Chinese stock market show that our model outperforms previous baseline models in terms of cumulative returns and Sharp ratio, and this advantage is more significant in the Chinese stock market, a merging market. It indicates that our proposed method is a promising way to build a automated stock trading system.

Date: 2022-12, Revised 2023-07
New Economics Papers: this item is included in nep-big, nep-cmp and nep-fmk
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