This is the another post of the series: How to build your own algotrading platform. Machine learning and trading is a very interesting subject. It is also a subject where you can spend tons of time writing code and reading papers and then a kid can beat you while playing Mario Kart.

Machine learning algorithms are algorithms where a machine can identify patterns in your data. Yeap, it is that simple. For example, find all the animals in this photo and draw a box around them.

Trading with Python

Also, name that animal. For trading as you can imagine it is pretty similar:. In order for a machine to "learn", you need to teach it what is right or wrong supervised learning or give it a big dataset and let it got wild unsupervised.

For identifying objects this is straight-forward but what about trading?

So I decided to write the first machine learning program in python that identifies support and resistance lines in Python. But how can an algorithm identify these areas?

Ladies and gents and robots , let me introduce you to MeanShift , an unsupervised algorithm that is used mostly for image recognition and is pretty trivial to setup and run but also very slow. The idea is that this algorithm will let me partition my data forex ticks into areas and then I can use the "edges" as support and resistance lines.

Cool idea but does it work? We analyse around 12 million datapoints of EURUSD in and a couple of months of The resistance lines are placed automagically by a machine learning algorithm.

What is really cool and spooky is that the algorithm pretty much nails it. It gets really spooky when we are going to use the algorithm to identify micro-structures and start scalping. The code is here so go crazy. Now let's step through the code. After you have your set of data you need to read them and clean them. Prepare for some pandas magic.

Machine Beats Human: Using Machine Learning in Forex - isycihe.web.fc2.com

We drop the empty values weekends and then we resample the data to 24 hours candlesticks ohcl. This makes it MUCH easier to plot. On the next post, we'll discuss how to make this work even better, discuss some very interesting results can the algorithm actually predict about the future? If you want to check the next article and read more about trading and investing using algorithms, signup to the newsletter.

If you have more feedback, ping me at jonromero or signup to the newsletter. This is an engineering tutorial on how to build an algotrading platform for experimentation and FUN. Any suggestions here are not financial advices. Enjoy at your own risk. Twitter LinkedIn Github Bitbucket. In the nexts posts, we are going to talk about: Optimize entries and exits. This and only this could make a ton of difference in your bank roll.

Forex Algorithmic Trading Strategies: My Experience | Toptal

Calculate position size in case you don't like Kelly criterion Find possible correlation between different pairs pair trading. I love the EURUSD vs GBPJPY correlation! For trading as you can imagine it is pretty similar: Then wash my underwear and don't mix the colored with the whites".

Posted Fri 13 May