Trading Strategy: 52-Weeks High Effect In Stocks
It is a value-based method that is used to supply information to an agent for the impending action. Q here stands for Quality. Quality refers to the action quality as to how beneficial that reward will be in accordance with the action taken. A Q-table is created with dimensions [state,action]. An agent interacts with the environment in either of the two ways — exploit and explore.
An exploit option suggests that all actions are considered and the one that gives maximum value to the environment is taken. An explore option is one where a random action is considered without considering the maximum future reward. Q of st and at is represented by a formula that calculates the maximum discounted future reward when an action is performed in a state s. The defined function will provide us with the maximum reward at the end of the n number of training cycles or iterations. Q-learning will rate each and every action and the one with the maximum value will be selected further.
Q-Learning is based on learning the values from the Q-table.
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- Introduction.
It functions well without the reward functions and state transition probabilities. Reinforcement learning can solve various types of problems. Trading is a continuous task without any endpoint. Trading is also a partially observable Markov Decision Process as we do not have complete information about the traders in the market.
Use the Yahoo Finance library to fetch the data for a particular stock. The stock used here for our analysis is Infosys stocks. The first function is the Agent class defines the state size, window size, batch size, deque which is the memory used, inventory as a list. It also defines some static variables like epsilon, decay, gamma, etc. Two neural network layers are defined for the buy, hold, and sell call.
The GradientDescentOptimizer is also used. The Agent has functions defined for buy and sell options. The rewards are subsequently calculated by adding or subtracting the value generated by executing the call option. The action taken at the next state is influenced by the action taken on the previous state. In every iteration, the state is determined on the basis of which an action is taken which will either buy or sell some stocks. The overall rewards are stored in the total profit variable. Once the agent is defined, initialize the agent.
Specify the number of iterations, initial money, etc to train the agent to decide the buy or sell options. Plot the total gains vs the invested figures. It is a well known and recognized data feed provider geared toward retail users and small institutions. Stanislav Kovalevsky has developed a package called QuantTools. It is an all in one package designed to enhance quantitative …. A few months ago a reader point me out this new way of connecting R and Excel. So I decided to write a post as the tool is really …. When testing trading strategies a common approach is to divide the initial data set into in sample data: the part of the data designed to calibrate the model and out of sample data: the part of the data used to validate the calibration and ensure that the performance created in sample will be reflected in the ….
I will probably add functionalities over time. Doing quantitative research implies a lot of data crunching and one needs clean and reliable data to achieve this. What is really needed is clean data that is easily accessible even without an internet connection.
Define the Trading Strategy
The most efficient way to do this for me has been to maintain a set of csv files. We could also include additional sanity checks of the inputs, and stationarity checks to make sure that the detrended time-series has desirable properties.
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See our Reader Terms for details. Full code for the moving-average trading function.
Data Scientist. Holding degrees in economics, econometrics, and statistics. Employed in news industry. Every Thursday, the Variable delivers the very best of Towards Data Science: from hands-on tutorials and cutting-edge research to original features you don't want to miss.
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