An intelligent hybrid trading system for discovering trading rules for the futures market using rough sets and genetic algorithms

Youngmin Kim, Wonbin Ahn, Kyong Joo Oh, David Enke

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

Discovering intelligent technical trading rules from nonlinear and complex stock market data, and then developing decision support trading systems, is an important challenge. The objective of this study is to develop an intelligent hybrid trading system for discovering technical trading rules using rough set analysis and a genetic algorithm (GA). In order to obtain better trading decisions, a novel rule discovery mechanism using a GA approach is proposed for solving optimization problems (i.e., data discretization and reducts) of rough set analysis when discovering technical trading rules for the futures market. Experiments are designed to test the proposed model against comparable approaches (i.e., random, correlation, and GA approaches). In addition, these comprehensive experiments cover most of the current trading system topics, including the use of a sliding window method (with or without validation dataset), the number of trading rules, and the size of training period. To evaluate an intelligent hybrid trading system, experiments were carried out on the historical data of the Korea Composite Stock Price Index 200 (KOSPI 200) futures market. In particular, trading performance is analyzed according to the number of sets of decision rules and the size of the training period for discovering trading rules for the testing period. The results show that the proposed model significantly outperforms the benchmark model in terms of the average return and as a risk-adjusted measure.

Original languageEnglish
Pages (from-to)127-140
Number of pages14
JournalApplied Soft Computing Journal
Volume55
DOIs
Publication statusPublished - 2017 Jun 1

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Genetic algorithms
Experiments
Composite materials
Testing
Financial markets

All Science Journal Classification (ASJC) codes

  • Software

Cite this

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An intelligent hybrid trading system for discovering trading rules for the futures market using rough sets and genetic algorithms. / Kim, Youngmin; Ahn, Wonbin; Oh, Kyong Joo; Enke, David.

In: Applied Soft Computing Journal, Vol. 55, 01.06.2017, p. 127-140.

Research output: Contribution to journalArticle

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