Book Image

Hands-On Machine Learning for Algorithmic Trading

By : Stefan Jansen
Book Image

Hands-On Machine Learning for Algorithmic Trading

By: Stefan Jansen

Overview of this book

The explosive growth of digital data has boosted the demand for expertise in trading strategies that use machine learning (ML). This book enables you to use a broad range of supervised and unsupervised algorithms to extract signals from a wide variety of data sources and create powerful investment strategies. This book shows how to access market, fundamental, and alternative data via API or web scraping and offers a framework to evaluate alternative data. You’ll practice the ML work?ow from model design, loss metric definition, and parameter tuning to performance evaluation in a time series context. You will understand ML algorithms such as Bayesian and ensemble methods and manifold learning, and will know how to train and tune these models using pandas, statsmodels, sklearn, PyMC3, xgboost, lightgbm, and catboost. This book also teaches you how to extract features from text data using spaCy, classify news and assign sentiment scores, and to use gensim to model topics and learn word embeddings from financial reports. You will also build and evaluate neural networks, including RNNs and CNNs, using Keras and PyTorch to exploit unstructured data for sophisticated strategies. Finally, you will apply transfer learning to satellite images to predict economic activity and use reinforcement learning to build agents that learn to trade in the OpenAI Gym.
Table of Contents (23 chapters)

Decision trees

Decision trees are a machine learning algorithm that predicts the value of a target variable based on decision rules learned from training data. The algorithm can be applied to both regression and classification problems by changing the objective function that governs how the tree learns the decision rules.

We will discuss how decision trees use rules to make predictions, how to train them to predict (continuous) returns as well as (categorical) directions of price movements, and how to interpret, visualize, and tune them effectively.

How trees learn and apply decision rules

The linear models we studied in Chapters 7, Linear Models and Chapter 8, Time Series Models, learn a set of parameters to predict the outcome...