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Financial Trading with Feature Preprocessing and Recurrent Reinforcement Learning

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  • Lin Li

Abstract

Financial trading aims to build profitable strategies to make wise investment decisions in the financial market. It has attracted interests in the machine learning community for a long time. This paper proposes to trade financial assets automatically using feature preprocessing skills and Recurrent Reinforcement Learning (RRL) algorithm. The strategy starts from technical indicators extracted from assets' market information. Then these technical indicators are preprocessed by Principal Component Analysis (PCA) and Discrete Wavelet Transform (DWT) and eventually inputted to the RRL algorithm to do the trading. The extensive empirical evidence shows that the proposed strategy is not only effective and robust in its performance, but also can mitigate the drawbacks underlying the initial trading using RRL.

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  • Lin Li, 2021. "Financial Trading with Feature Preprocessing and Recurrent Reinforcement Learning," Papers 2109.05283, arXiv.org.
    • Handle: RePEc:arx:papers:2109.05283
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    File URL: http://arxiv.org/pdf/2109.05283
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    Cited by:

    1. Sevcan Uzun & Ahmet Sensoy & Duc Khuong Nguyen, 2023. "Jump forecasting in foreign exchange markets: A high‐frequency analysis," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 578-624, April.

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