Trade Selection with Supervised Learning and OCA

7 Pages Posted: 27 Dec 2018

See all articles by David Saltiel

David Saltiel

A.I. Square Connect

Eric Benhamou

A.I. Square Connect; LAMSADE- Paris Dauphine University

Date Written: December 9, 2018

Abstract

In recent years, state-of-the-art methods for supervised learning have exploited increasingly gradient boosting techniques, with mainstream efficient implementations such as xgboost or lightgbm. One of the key points in generating proficient methods is Feature Selection (FS). It consists in selecting the right valuable effective features. When facing hundreds of these features, it becomes critical to select best features. While filter and wrappers methods have come to some maturity, embedded methods are truly necessary to find the best features set as they are hybrid methods combining features filtering and wrapping. In this work, we tackle the problem of finding through machine learning best a priori trades from an algorithmic strategy. We derive this new method using coordinate ascent optimization and using block variables. We compare our method to Recursive Feature Elimination (RFE) and Binary Coordinate Ascent (BCA). We show on a real life example the capacity of this method to select good trades a priori. Not only this method outperforms the initial trading strategy as it avoids taking loosing trades, it also surpasses other method, having the smallest feature set and the highest score at the same time. The interest of this method goes beyond this simple trade classification problem as it is a very general method to determine the optimal feature set using some information about features relationship as well as using coordinate ascent optimization.

Keywords: Trade Selection, OCA, Supervised Learning, Features Selection

JEL Classification: T01, T05

Suggested Citation

Saltiel, David and Benhamou, Eric, Trade Selection with Supervised Learning and OCA (December 9, 2018). Available at SSRN: https://ssrn.com/abstract=3298347 or http://dx.doi.org/10.2139/ssrn.3298347

David Saltiel (Contact Author)

A.I. Square Connect ( email )

35 Boulevard d'Inkermann
Neuilly sur Seine, 92200
France

Eric Benhamou

A.I. Square Connect ( email )

35 Boulevard d'Inkermann
Neuilly sur Seine, 92200
France

LAMSADE- Paris Dauphine University ( email )

Place du Marechal de Lattre de Tassigny
Pais, 75016
France

HOME PAGE: http://https://www.lamsade.dauphine.fr/

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