Evolution of trading strategies with flexible structures: A configuration comparison Articles uri icon

publication date

  • February 2019

start page

  • 242

end page

  • 262

volume

  • 331

international standard serial number (ISSN)

  • 0925-2312

electronic international standard serial number (EISSN)

  • 1872-8286

abstract

  • Evolutionary Computation is often used in the domain of automated discovery of trading rules. Within this area, both Genetic Programming and Grammatical Evolution offer solutions with similar structures that have two key advantages in common: they are both interpretable and flexible in terms of their structure. The core algorithms can be extended to use automatically defined functions or mechanisms aimed to promote parsimony. The number of references on this topic is ample, but most of the studies focus on a specific setup. This means that it is not clear which is the best alternative. This work intends to fill that gap in the literature presenting a comprehensive set of experiments using both techniques with similar variations, and measuring their sensitivity to an increase in population size and composition of the terminal set. The experimental work, based on three S&P 500 data sets, suggest that Grammatical Evolution generates strategies that are more profitable, more robust and simpler, especially when a parsimony control technique was applied. As for the use of automatically defined function, it improved the performance in some experiments, but the results were inconclusive. (C) 2018 Elsevier B.V. All rights reserved.

keywords

  • evolutionary computation; genetic programming; grammatical evolution; trading; rules; algorithms; predictability; markets; gp