[HN Gopher] FinRL: The first open-source project for financial r...
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FinRL: The first open-source project for financial reinforcement
learning
Author : ghgr
Score : 86 points
Date : 2022-03-27 11:28 UTC (11 hours ago)
(HTM) web link (github.com)
(TXT) w3m dump (github.com)
| t_mann wrote:
| I really can't help but wonder - say I want to create a trading
| strategy that I actually want to use. Is there really any point
| in learning an open source framework, where I can assume that the
| most profitable strategies it can produce are already being used
| by someone? I think I'd rather start by learning the underlying
| frameworks like TensorFlow, that this one seems to wrap, and
| produce something that has at least a minimal chance of being
| somewhat original.
|
| That being said, I have more fundamental doubts that as a private
| individual, with only off-the-shelf hardware, one could produce
| any meaningful signals with DL that actually beat the market.
| nautilus12 wrote:
| This is self defeating if you open source an approach like this
| and it is effective, then the laws of arbitrage says that the
| market will remove any additional benefits of using it.
| hungryforcodes wrote:
| It would have to be the DOMINANT approach for that to happen.
| [deleted]
| vageli wrote:
| > This is self defeating if you open source an approach like
| this and it is effective, then the laws of arbitrage says that
| the market will remove any additional benefits of using it.
|
| This assumes perfect information. The effects of law of
| arbitrage are not instantaneous.
| [deleted]
| Stampo00 wrote:
| Based on the name, I was hoping it was a roguelike.
| Galanwe wrote:
| As someone with 10+ years of exp in the industry, I had no clue
| what this was actually doing after reading the github page. Had
| to dive through the examples and videos.
|
| The alphas showcased seem weak: 1.5 max gross SR in sample,
| unresidualized, unconstrained and standalone.
|
| That would need to be blended with a hundred un correlated others
| to have a decent portfolio.
| torbTurret wrote:
| Quants: So much fancy vocabulary just to consistently
| underperform your favorite mutual index fund :)
| nuclearnice1 wrote:
| What does unresidualized mean?
|
| What do the need to do to the software to "residualize" it? If
| that's even the right expression.
| Galanwe wrote:
| It means to remove a set of factors from the signal - or the
| returns of the signal, which would impact its performance or
| exposure, and are not meant to be captured by the signal.
|
| Imagine a "I have no preference" signal which gives a weight
| of 1/n to each asset of the portfolio - you have 100 stocks
| in your basket, you give 1% to each. If you would compute its
| performance, you would see that this portfolio would roughly
| make 10% average returns over 20 years. That seems good
| right?
|
| Well no it's not, because these 10% don't come from anything
| meaningful that your signal did. It came because you gained
| exposure to the market, and that exposure "carried" your
| signal performance.
|
| > What do the need to do to the software to "residualize" it?
|
| Well residualizing overall just means that you want to
| regress your signals on a set of factors that would carry its
| performance for no justified reason. In practical terms, you
| could start by doing a linear regression of your signal
| against such factors (say beta, country, sector) and only
| keeping the remaining residuals (alpha).
| artemonster wrote:
| Can you recommend books on the topic to learn about this
| kind of stuff?
| harveynick wrote:
| https://www.amazon.co.uk/Quantitative-Equity-Portfolio-
| Manag...
|
| Caveat: it's not exactly "easy reading", and you might
| want to have the "three blue one brown" YouTube channel
| on standby.
| artemonster wrote:
| Watched every video of them, I am okay with math. Thank
| you very much! Btw, since quant industry is full of
| secrets - is there any source on some actual money
| figures - how much firms make, what are the sums that are
| required to be shuffled, what are the frequencies of
| trades, profitability figures? Anything to get a slight
| glimpse into inner workings of this. Unfortunately
| googling turns out nothing or scams
| l337 wrote:
| Hedge funds are a very diverse group: from small shops
| managing tens of millions to the large funds managing
| tens of billions.
|
| The very good ones probably make around 20% a year
| (meaning that they earn around $40M per year per $1B
| that's under management).
|
| HFT companies are a different story. The biggest ones
| make around $1B/year (e.g Virtu, Flow Traders which are
| public), with a few of them even bigger.
|
| There are many tier two companies making tens - few
| hundred million dollars per year.
|
| So none of them are really big (compared, to say, a big
| bank), but they do make a lot of money per employee, and
| the salaries reflect that.
| caffeine wrote:
| It comes from the "residual" of a linear regression.
|
| So you take some obvious variable like the market basket of
| stocks, do a regression, and then do your machine learning on
| the residuals.
|
| The reason is that you don't get "credit" for doing whatever
| the market did, you only get credit for doing even better.
| igorkraw wrote:
| What's the best way for someone doing and ML and optimisation
| PhD to get into quant research/Trading? I've been playing with
| paper trading, trying to use creative data sources to find
| alpha and algotrading micro amounts of Cryptos for a while now
| and am seriously considering doing this for my post PhD life if
| I can't find a nice tenure track (a complication is that I do
| not want to leave Switzerland until I have citizenship here, so
| any advice or introductions would be very appreciated!)
| melony wrote:
| Get an internship at a reputable prop shop or hedge fund
| (that specialize in quant finance). There are plenty in
| Switzerland.
| bravura wrote:
| Aren't they going to impose a strong non-compete agreement
| on you, so that once you've actually learned something you
| are handcuffed to them?
| auntienomen wrote:
| You can't really impose strong non competes on interns.
| You don't show them the good stuff either. Just enough to
| get/give an impression for later recruiting.
| jasfi wrote:
| I might be able to use these algorithms in my automated trading
| system: https://tradecast.one. I'm not sure how well they
| perform, but something to consider.
| mumblemumble wrote:
| Quick hot take: when the project has a Venmo QR code for
| soliciting donations, you can safely assume they have not
| actually figured out how to make lots of money on the securities
| markets.
|
| Which is not me looking to trash it. I'd just encourage people to
| be aware of the context. This is an _academic_ project which has
| apparently only been tested on hindcast data. Real life trading
| may present challenges that were well outside their scope of
| research.
| nightski wrote:
| I'd agree with the skepticism. That said, it takes a minimum of
| 25k to get started using something like this in the real world
| due to the PDT rule (honestly more than that so you don't dip
| below 25k). It's possible they just aren't ready to throw that
| kind of capital at it yet.
|
| Also even if they aren't using real money that does not mean
| they are limited to historical data. You can run algos on live
| data even without actively trading. What you don't get is how
| your actions affect the market itself.
| [deleted]
| charcircuit wrote:
| Investopedia says that it only required when day trading on
| margin.
|
| https://www.investopedia.com/terms/p/patterndaytrader.asp
| nightski wrote:
| Cash settlements take several days. So while that is
| correct, a margin account let's you use funds from the sale
| of a stock immediately instead of waiting for the
| settlement to occur. You aren't taking out any margin (with
| interest) in this case, just using the funds you already
| have (but haven't settled). Otherwise a cash account limits
| how much you can trade very quickly since you are waiting
| on trades to settle.
| nickles wrote:
| Equities settle T+2. Without a margin account, Reg T
| requires that cash be tied up until a trade is settled.
| It's not viable to day trade like that.
| [deleted]
| charcircuit wrote:
| Doesn't the exchange match people with another person who
| is buying / selling it? Every single cryptocurrency or
| video game exchange I have used has settled pretty much
| instantly.
|
| How hard is decrementing the shares of one user and
| incrementing the shares of another.
| xxxtentachyon wrote:
| You can settle as quickly as you want if you're engaged
| directly with your counterparty. But yes, T+2 is wildly
| outdated and will likely move to T+1 in the next few
| years. Longer term, anything less than same-day
| settlement both wastes capital (of BDs who need to post
| collateral while their customers' trades wait to settle)
| and risks contagion (since each additional day of
| settlement gives a party more time to go bankrupt) IMO
| v0idzer0 wrote:
| > How hard is decrementing the shares of one user and
| incrementing the shares of another.
|
| whose database are you incrementing/decrementing in? Real
| life stock trades happen across multiple exchanges with
| multiple intermediaries (brokers, market makers, end
| users). Without a blockchain, this is not trivial to
| coordinate safely
| nickles wrote:
| > Doesn't the exchange match people with another person
| who is buying / selling it? Every single cryptocurrency
| or video game exchange I have used has settled pretty
| much instantly.
|
| There are multiple exchanges where stocks are traded, and
| order routing is typically transparent when using retail
| brokerages. The exchanges only provide the matching
| engine, while brokers handle custody. The process of
| transferring the ownership between brokerages is the
| clearing step which is handled by the DTCC.
|
| Cryptocurrency exchanges provide both the matching engine
| and custody, so transferring ownership can be done
| instantly by updating records in the exchange's database.
| The clearing step occurs when transferring coins to
| another wallet or exchange, when the transaction actually
| hits the blockchain.
|
| > How hard is decrementing the shares of one user and
| incrementing the shares of another.
|
| It's surprisingly difficult. Clearinghouses (centralized)
| and blockchains (decentralized) exist to solve this very
| problem.
| pid-1 wrote:
| > Also even if they aren't using real money that does not
| mean they are limited to historical data. You can run algos
| on live data even without actively trading. What you don't
| get is how your actions affect the market itself.
|
| That equals to useless toy software in my book. But it's just
| my opinion.
|
| Edit: Look, I don't want to trash the devs for no reason, but
| the amount of "finance" academic stuff that claims to produce
| successful strategies is just ridiculous. At some point
| people just get tired.
| nightski wrote:
| You may well be right that it's a toy (and judging from
| their docs it seems like it), but it's basically the first
| step in using an algo for trading. You always test on live
| market feeds first.
| ausbah wrote:
| smells like a solution in search of a problem
| ghgr wrote:
| I'm curious how efficient is RL for trading. Given that RL is
| extremely data-hungry I'd say that this approach is likely to
| result in an overfit model. Does anybody have positive
| experiences with this?
| [deleted]
| Lapsa wrote:
| ```Technical indicators: 'macd', 'boll_ub', 'boll_lb', 'rsi_30',
| 'dx_30', 'close_30_sma', 'close_60_sma'.``` lulz
| yeahwhatever10 wrote:
| Why lulz? Bad indicators, too few?
| ploika wrote:
| Technical analysis (Bollinger bands and the like) would be
| treated similarly to horoscopes by many people who know how
| to work a Bloomberg terminal.
| saeranv wrote:
| I've never understood how someone had the nerve to
| trademark "Bollinger bands", when all they are is just a
| measure of 2 standard deviations from a rolling mean of
| share price. It's like renaming 1+1=2 after yourself and
| and trademarking it's use.
| mellavora wrote:
| So then why does Bloomberg build in so many technical
| indicators into its product?
|
| Look, I share your skepticism of technical analysis, but
| there are many traders who do not. And when managing
| traders, you might want to let them trade on TA because it
| can give them a reason to take action. Otherwise they can
| suffer from analysis paralysis.
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