Classification-Based Financial Markets Prediction Using Deep Neural Networks
Matthew Francis Dixon
Illinois Institute of Technology - Stuart School of Business, IIT
Jin Hoon Bang
July 18, 2016
Algorithmic Finance, 2016.
Deep neural networks (DNNs) are powerful types of artificial neural networks (ANNs) that use several hidden layers. They have recently gained considerable attention in the speech transcription and image recognition community for their superior predictive properties including robustness to over fitting. However their application to algorithmic trading has not been previously researched, partly because of their computational complexity. This paper describes the application of DNNs to predicting financial market movement directions. In particular we describe the configuration and training approach and then demonstrate their application to back testing a simple trading strategy over 43 different Commodity and FX future mid-prices at 5-minute intervals. All results in this paper are generated using a C implementation on the Intel Xeon Phi co-processor which is 11.4x faster than the serial version and a Python strategy back testing environment both of which are available as open source code written by the authors.
Number of Pages in PDF File: 20
Keywords: Deep Neural Networks, Algorithmic Trading, Commodity Futures, FX Futures
JEL Classification: C45, G1
Date posted: March 30, 2016 ; Last revised: December 9, 2016