IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2602.18481.html

AlphaForgeBench: Benchmarking End-to-End Trading Strategy Design with Large Language Models

Author

Listed:
  • Wentao Zhang
  • Mingxuan Zhao
  • Jincheng Gao
  • Jieshun You
  • Huaiyu Jia
  • Yilei Zhao
  • Bo An
  • Shuo Sun

Abstract

The rapid advancement of Large Language Models (LLMs) has led to a surge of financial benchmarks, evolving from static knowledge evaluation toward interactive trading simulations. However, existing frameworks for evaluating real-time trading largely overlook a critical failure mode: the severe behavioral instability of LLMs in sequential decision-making under financial uncertainty. Through extensive experiments, we show that when deployed as trading agents, LLMs exhibit extreme run-to-run variance, generate inconsistent action sequences even under deterministic decoding, and frequently produce irrational action flipping across adjacent time steps. We attribute these behaviors to the stateless autoregressive nature of LLMs, which lack persistent memory of prior actions, together with their sensitivity to continuous-to-discrete action mappings in portfolio allocation tasks. These deficiencies fundamentally undermine the reliability and reproducibility of many existing online and offline trading benchmarks. To address these limitations, we propose AlphaForgeBench, a principled evaluation framework that redefines LLMs as quantitative researchers rather than stochastic trading agents. Instead of producing discrete trading actions, AlphaForgeBench requires models to generate executable alpha factors and compose factor-based trading strategies grounded in financial knowledge. This paradigm decouples reasoning from execution mechanics, enabling deterministic and reproducible evaluation while remaining aligned with real-world quantitative research workflows. Extensive experiments across multiple state-of-the-art LLMs demonstrate that AlphaForgeBench eliminates execution-induced instability and provides a rigorous benchmark for evaluating financial reasoning, strategy formulation, and alpha discovery. Webpage at https://finbrain-lab-hkustgz.github.io/AlphaForgeBench

Suggested Citation

  • Wentao Zhang & Mingxuan Zhao & Jincheng Gao & Jieshun You & Huaiyu Jia & Yilei Zhao & Bo An & Shuo Sun, 2026. "AlphaForgeBench: Benchmarking End-to-End Trading Strategy Design with Large Language Models," Papers 2602.18481, arXiv.org, revised May 2026.
  • Handle: RePEc:arx:papers:2602.18481
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2602.18481
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Haofei Yu & Fenghai Li & Jiaxuan You, 2025. "LiveTradeBench: Seeking Real-World Alpha with Large Language Models," Papers 2511.03628, arXiv.org.
    2. Xiao-Yang Liu & Guoxuan Wang & Hongyang Yang & Daochen Zha, 2023. "FinGPT: Democratizing Internet-scale Data for Financial Large Language Models," Papers 2307.10485, arXiv.org, revised Nov 2023.
    3. Yuzhe Yang & Yifei Zhang & Yan Hu & Yilin Guo & Ruoli Gan & Yueru He & Mingcong Lei & Xiao Zhang & Haining Wang & Qianqian Xie & Jimin Huang & Honghai Yu & Benyou Wang, 2024. "UCFE: A User-Centric Financial Expertise Benchmark for Large Language Models," Papers 2410.14059, arXiv.org, revised Feb 2025.
    4. Qianqian Xie & Weiguang Han & Yanzhao Lai & Min Peng & Jimin Huang, 2023. "The Wall Street Neophyte: A Zero-Shot Analysis of ChatGPT Over MultiModal Stock Movement Prediction Challenges," Papers 2304.05351, arXiv.org, revised Apr 2023.
    5. Shijie Wu & Ozan Irsoy & Steven Lu & Vadim Dabravolski & Mark Dredze & Sebastian Gehrmann & Prabhanjan Kambadur & David Rosenberg & Gideon Mann, 2023. "BloombergGPT: A Large Language Model for Finance," Papers 2303.17564, arXiv.org, revised Dec 2023.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thanos Konstantinidis & Giorgos Iacovides & Mingxue Xu & Tony G. Constantinides & Danilo Mandic, 2024. "FinLlama: Financial Sentiment Classification for Algorithmic Trading Applications," Papers 2403.12285, arXiv.org.
    2. Hoyoung Lee & Youngsoo Choi & Yuhee Kwon, 2024. "Quantifying Qualitative Insights: Leveraging LLMs to Market Predict," Papers 2411.08404, arXiv.org.
    3. Artur Kulpa & Grzegorz Wojarnik, 2025. "Prompt Engineering in Finance: An LLM-Based Multi-Agent Architecture for Decision Support," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 1201-1217.
    4. Chen, Rui & Jiang, Haiqi & Guo, Tingyu & Fan, Chenyou, 2025. "Can Large Language Models forecast carbon price movements? Evidence from Chinese carbon markets," Research in International Business and Finance, Elsevier, vol. 77(PB).
    5. Masanori Hirano & Kentaro Imajo, 2024. "The Construction of Instruction-tuned LLMs for Finance without Instruction Data Using Continual Pretraining and Model Merging," Papers 2409.19854, arXiv.org.
    6. Masoud Soleimani, 2025. "LLM-Generated Counterfactual Stress Scenarios for Portfolio Risk Simulation via Hybrid Prompt-RAG Pipeline," Papers 2512.07867, arXiv.org.
    7. Yuqi Nie & Yaxuan Kong & Xiaowen Dong & John M. Mulvey & H. Vincent Poor & Qingsong Wen & Stefan Zohren, 2024. "A Survey of Large Language Models for Financial Applications: Progress, Prospects and Challenges," Papers 2406.11903, arXiv.org.
    8. Joohyoung Jeon & Hongchul Lee, 2026. "Can Blindfolded LLMs Still Trade? An Anonymization-First Framework for Portfolio Optimization," Papers 2603.17692, arXiv.org.
    9. Zuoyou Jiang & Li Zhao & Rui Sun & Ruohan Sun & Zhongjian Li & Jing Li & Daxin Jiang & Zuo Bai & Cheng Hua, 2025. "Alpha-R1: Alpha Screening with LLM Reasoning via Reinforcement Learning," Papers 2512.23515, arXiv.org.
    10. Fernando Spadea & Oshani Seneviratne, 2025. "Aligning Language Models with Investor and Market Behavior for Financial Recommendations," Papers 2510.15993, arXiv.org.
    11. Pu Cheng & Juncheng Liu & Yunshen Long, 2026. "PolyBench: Benchmarking LLM Forecasting and Trading Capabilities on Live Prediction Market Data," Papers 2604.14199, arXiv.org.
    12. Gongao Zhang & Haijiang Zeng & Lu Jiang, 2026. "Uni-FinLLM: A Unified Multimodal Large Language Model with Modular Task Heads for Micro-Level Stock Prediction and Macro-Level Systemic Risk Assessment," Papers 2601.02677, arXiv.org.
    13. Mohammed-Khalil Ghali & Cecil Pang & Oscar Molina & Carlos Gershenson-Garcia & Daehan Won, 2025. "Forecasting Commodity Price Shocks Using Temporal and Semantic Fusion of Prices Signals and Agentic Generative AI Extracted Economic News," Papers 2508.06497, arXiv.org.
    14. Ching-Nam Hang & Pei-Duo Yu & Roberto Morabito & Chee-Wei Tan, 2024. "Large Language Models Meet Next-Generation Networking Technologies: A Review," Future Internet, MDPI, vol. 16(10), pages 1-29, October.
    15. Xia Li & Hanghang Zheng & Xiwei Zhuang & Zhong Wang & Xiao Chen & Hong Liu & Jasmine Bai & Mao Mao, 2025. "Class-Imbalanced-Aware Adaptive Dataset Distillation for Scalable Pretrained Model on Credit Scoring," Papers 2501.10677, arXiv.org, revised Mar 2026.
    16. Lezhi Li & Ting-Yu Chang & Hai Wang, 2023. "Multimodal Gen-AI for Fundamental Investment Research," Papers 2401.06164, arXiv.org.
    17. Cristina Angelico & Enrico Bernardini, 2026. "Can GenAI fill banks' emissions data gaps?," Questioni di Economia e Finanza (Occasional Papers) 1003, Bank of Italy, Economic Research and International Relations Area.
    18. Yichen Luo & Yebo Feng & Jiahua Xu & Paolo Tasca & Yang Liu, 2025. "LLM-Powered Multi-Agent System for Automated Crypto Portfolio Management," Papers 2501.00826, arXiv.org, revised Jun 2026.
    19. Alberto Menéndez Medina & José Antonio Heredia Álvaro, 2024. "Using Generative Pre-Trained Transformers (GPT) for Electricity Price Trend Forecasting in the Spanish Market," Energies, MDPI, vol. 17(10), pages 1-15, May.
    20. Yijia Xiao & Edward Sun & Tong Chen & Fang Wu & Di Luo & Wei Wang, 2025. "Trading-R1: Financial Trading with LLM Reasoning via Reinforcement Learning," Papers 2509.11420, arXiv.org.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:arx:papers:2602.18481. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    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.