Author
Listed:
- Yu-Heng Hsieh
(Department of Computer Science, National Yang Ming Chiao Tung University, Hsinchu 30010, Taiwan)
- Chiung-Han Lai
(Department of Computer Science, National Yang Ming Chiao Tung University, Hsinchu 30010, Taiwan)
- Shyan-Ming Yuan
(Department of Computer Science, National Yang Ming Chiao Tung University, Hsinchu 30010, Taiwan)
Abstract
This study develops a novel AI-based trading framework designed to consistently generate profits across cyclical bullish and bearish futures markets. Unlike conventional strategies that rely on static rules or a single predictive model, the proposed framework introduces a dual-agent deep reinforcement learning (DRL) architecture, where one agent specializes in bullish conditions and the other in bearish conditions, while a trading decision selector dynamically predicts market regimes and allocates execution accordingly. This design enables the system to adapt to regime shifts and mitigate risks arising from market volatility and extreme events. Using Mini Taiwan Stock Exchange Index Futures (MTX) as a case study, a four-year historical backtest is conducted covering multiple disruptive periods, including the tax adjustment and the Russia–Ukraine conflict. The empirical results show that, under a monthly capital reset and loss-compensation rule with a fixed investment of TWD 500,000 per month, the proposed framework achieves an average cumulative return of 2240%, an annualized return of 109%, and a Sharpe ratio of 0.31, with the cumulative ROI exceeding twice the MTX index growth over the same period. Although the Sharpe ratio remains moderate, this outcome reflects the framework’s emphasis on directional trading and absolute return maximization, where profitable trades outweigh intermittent losses despite higher short-term volatility. These findings suggest that adaptive, regime-aware DRL architectures are particularly effective for futures trading in markets characterized by frequent trend reversals, offering both methodological innovation and practical applicability under realistic market conditions, with strong returns achieved at a moderate risk-adjusted level.
Suggested Citation
Yu-Heng Hsieh & Chiung-Han Lai & Shyan-Ming Yuan, 2026.
"A Novel AI-Based Trading Framework for Futures Markets: Evidence from the MTX Case Study,"
IJFS, MDPI, vol. 14(3), pages 1-22, March.
Handle:
RePEc:gam:jijfss:v:14:y:2026:i:3:p:67-:d:1877805
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