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Design and Analysis of Algorithmic Trading Automation

Description

With the coming advances of computational power, algorithmic trading has become one of the primary strategies to trading on the stock market. To understand why and how these strategies have been effective, this project has taken a look at the

With the coming advances of computational power, algorithmic trading has become one of the primary strategies to trading on the stock market. To understand why and how these strategies have been effective, this project has taken a look at the complete process of creating tools and applications to analyze and predict stock prices in order to perform low-frequency trading. The project is composed of three main components. The first component is integrating several public resources to acquire and process financial trading data and store it in order to complete the other components. Alpha Vantage API, a free open source application, provides an accurate and comprehensive dataset of features for each stock ticker requested. The second component is researching, prototyping, and implementing various trading algorithms in code. We began by focusing on the Mean Reversion algorithm as a proof of concept algorithm to develop meaningful trading strategies and identify patterns within our datasets. To augment our market prediction power (“alpha”), we implemented a Long Short-Term Memory recurrent neural network. Neural Networks are an incredibly effective but often complex tool used frequently in data science when traditional methods are found lacking. Following the implementation, the last component is to optimize, analyze, compare, and contrast all of the algorithms and identify key features to conclude the overall effectiveness of each algorithm. We were able to identify conclusively which aspects of each algorithm provided better alpha and create an entire pipeline to automate this process for live trading implementation. An additional reason for automation is to provide an educational framework such that any who may be interested in quantitative finance in the future can leverage this project to gain further insight.

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Date Created
2019-05