When creating Deep Learning Algo Trading systems based on history price data of a certain time period you can choose between several approaches to establish a model creation process:
- Splitting the complete history in exactly three sets (training, validation, test) and creating one model which you will use for your trading (Spoiler: Bad idea)
- Iterating over different timeframe sizes for the three datasets (training, validation, test) and this way only using a certain percentage of the available history to create exactly one model (as in 1.)
- Based on a fixed size of the three dataset timeframes (for training, validation, test) you create a shifting series of models and rate the series result instead of rating the result of a single model
- Based on a fixed size for the test dataset frame you create a series of models with variable training and validation dataset timeframe sizes. As size for the current training and test dataset timeframe size you select the training / validation timeframe combination with the highest validation-test result correlation in the previous period. The test dataset timeframe size defines the rhythm of model deployments.
The general idea behind this model production process evolution is the fact that markets change, trends change and players adjust their systems constantly. AI system developers have to implement this ability of constant adujstment in their lifecycle management. The less fixed hyperparameters you use the harder the model creation process is to handle, but the results improve significantly.
Now, that we know how to connect Metatrader to our node.js application and after we learned some basics of how to build a LMAX FIX API client the logical next step is to merge those two modules and build an arbitrage trading system. It’s nearly as simple as it sounds.
Long story short: I have done it. It does not work. The slippage of the Metatrader side will destroy every detected opportunity. Even with a LD4 Crossconnect to LMAX and with nearly every possible combination of MT4 Brokers and their different datacenters (which from my point of view are proxies that suggest a low latency).
Write me an email if you have further questions or would like to discuss this post.
Usually when you read some articles about some students, banks or quants researching or operating a new trading system you will find an explanation that their system works because they predict more than 50% of all cases correctly. Some authors even write “more than 51%” to underline that it is really, but really more than in half of all cases.
Continue reading “Why the winning rate of trading systems is not relevant”
This is a sequel to Part 1 of my introduction to building a node.js implementation of a Forex FIX Protocol Client for LMAX. After you have heard some basics let’s now get to the hard facts. At the end of this post we should be able to logon to the LMAX market feed server. This may sound not very complicated – but believe me, there is a lot to talk about.
Continue reading “Building a node.js implementation of a Forex FIX Protocol Client for LMAX – Part 2”
For those who do not know what the FIX Protocol is: “The Financial Information eXchange (FIX) protocol is an electronic communications protocol initiated in 1992 for international real-time exchange of information related to the securities transactions and markets.” (Wikipedia).
Brokers, banks and many other players in the financial market use the fix protocol for financial communication. In the forex world – from the perspective of avergage guys like us – the FIX protocol is the pro version of Metatrader.
Advantages: Much smaller spreads, no technical limitation concerning the implementation, reliable connection latency (as the requests are not redirected), no “Last Look” (LMAX)
The combination of an extremley low latency (if you use a server with an interconnect to LMAX) and the missing “Last Look” for your opponent lead to a very low slippage.
Disadvantages: Usually the initial deposit is higher. (LMAX “Professional”: 10.000$/€)
Continue reading “Building a node.js implementation of a Forex FIX Protocol Client for LMAX – Part 1”
You may think about the smartest, fastest and most reliable way to connect your node.js application with your Metatrader 4 instance. As I already went through the whole process of testing, approving and productive usage I will tell you the best way to connect MT4 to your node.js application.
As time is money I will start with the result without wasting your and my time telling you about the ways that did not work.
Continue reading “Connect node.js to your MT4 Expert Advisor for a two-way realtime communication”