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)

How ConvNets work

CNNs are conceptually similar to the feedforward neural networks we covered in the previous chapter. They consist of units that contain parameters, called weights and biases, and the training process adjusts these parameters to optimize the network's output for a given input. Each unit applies its parameters to a linear operation on the input data or activations received from other units, possibly followed by a non-linear transformation.

The overall network models a differentiable function that maps raw data, for example, image pixels to class probabilities, using an output activation such as the softmax function. CNNs also use a loss function such as cross-entropy to compute a single quality metric from the output layer, and use the gradients of the loss with respect to the network parameter to learn.

Feedforward neural networks with fully-connected layers...