HETEROGENEOUS TRADING STRATEGY ENSEMBLING FOR INTRADAY TRADING ALGORITHMS

• Coetzee Koegelenberg Stellenbosch Unit for Operations Research in Engineering, Department of Industrial Engineering, Stellenbosch University, South Africa https://orcid.org/0000-0002-7531-3226
• Jan van Vuuren Stellenbosch Unit for Operations Research in Engineering, Department of Industrial Engineering, Stellenbosch University, South Africa https://orcid.org/0000-0003-4757-5832

DOI:

https://doi.org/10.7166/34-3-2951

Abstract

Since the inception of algorithmic trading during the mid-1970s, considerable resources and time have been committed by the financial sector to the development of trading algorithms in the hope of obtaining a competitive advantage over human contenders. A plethora of trading algorithms has been proposed in the literature; each algorithm is unique in its design, but little emphasis has been placed on heterogeneous trading strategy ensembling. In this paper we propose a trading strategy ensemble method for combining three different domain-specific trading strategies: a deterministic strategy, a probabilistic strategy, and a machine-learning strategy. The objective of the trading strategy ensemble is to find an appropriate trade-off between the levels of return and the risk exposure of a trader. We implement our strategy across different historical forex currency pair data in a bid to validate the trading strategy ensemble, and we analyse the results by invoking appropriate return and risk performance measures.