IDEAS home Printed from https://ideas.repec.org/a/eee/chsofr/v210y2026ip1s0960077926007344.html

Mitigating false signals in crypto-asset trading using a binary confirmation mechanism integrating AI-driven signal validation and financial signal processing

Author

Listed:
  • Karasu, Seçkin

Abstract

This study presents a novel hybrid decision-support framework that integrates financial signal processing (FSP) techniques with a multi-model machine learning (ML) validation layer to minimize the risks posed by high volatility and false signals in crypto-asset markets. Unlike traditional forecasting models, the proposed system does not employ the predictive component as a standalone signal generator; instead, it is positioned as a Binary Confirmation Mechanism (BCM) that validates technical data. The research methodology consists of four fundamental stages: First, the parameters of the Super Trend (ST), Williams %R (WR), and Williams Fractal (WF) indicators are optimized using 5-fold Time-Series Cross-Validation on BTC-USD data spanning from 2014 to 2021. Second, nine different hybrid signal scenarios including single, dual and full combinations are derived from these optimized indicators. Third, the generated signals are filtered through eight distinct ML algorithms, including Random Forest (RF), Support Vector Machines (SVM), and Multi-Layer Perceptron (MLP). In this stage, a buy-side execution requires a match between the technical signal and ML approval, whereas an asymmetric priority is given to technical signals for sell-side operations to ensure rapid exit and capital preservation. Finally, the system's performance is evaluated through portfolio simulations on out-of-sample test data from 2021 to 2026. The findings demonstrate that the developed hybrid approach successfully mitigates false signals, elevates the cumulative equity curve above the Buy & Hold benchmark, and provides more stable risk management by reducing maximum drawdowns. This longitudinal analysis covering a 12-year period reveals that validating optimized financial signals with artificial intelligence significantly enhances execution consistency in algorithmic trading strategies.

Suggested Citation

  • Karasu, Seçkin, 2026. "Mitigating false signals in crypto-asset trading using a binary confirmation mechanism integrating AI-driven signal validation and financial signal processing," Chaos, Solitons & Fractals, Elsevier, vol. 210(P1).
  • Handle: RePEc:eee:chsofr:v:210:y:2026:i:p1:s0960077926007344
    DOI: 10.1016/j.chaos.2026.118593
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0960077926007344
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.chaos.2026.118593?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chsofr:v:210:y:2026:i:p1:s0960077926007344. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thayer, Thomas R. (email available below). General contact details of provider: https://www.journals.elsevier.com/chaos-solitons-and-fractals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.