Applying Machine Learning to Cryptocurrency Trading
Paweł Duda (@paweldude)
Disclaimer
I am no expert in any of this
My machine learning skill
My cryptocurrency trading skill
My time for this presentation
A very simple
classification example
Sides | Figure |
---|---|
3 | Triangle |
4 | Quadrilateral |
5 | Pentagon |
Feature
Classes
Sides | Interior angles sum | (...) | Figure |
---|---|---|---|
3 | 180° | (...) | Triangle |
4 | 360° | (...) | Quadrilateral |
5 | 540° | (...) | Pentagon |
Features
Classes
We can extract more features from our data set to improve accuracy
Feature vector
from sklearn.svm import SVC
# Feature vectors: [[sides]]
X = [[3], [4], [5], [3], [3] ]
# Classes: figure name
y = ['triangle', 'quadrilateral', 'pentagon', 'triangle', 'triangle']
classifier = SVC() # support vector classifier
classifier.fit(X, y)
X_test = [[3], [4], [4], [5], [3], [4]]
y_test = ['triangle', 'quadrilateral', 'quadrilateral', 'pentagon', 'triangle', 'quadrilateral']
print(classifier.score(X_test, y_test)) # 1.0 (100% correct)
print(classifier.predict([[3], [5], [4]])) # ['triangle', 'pentagon', 'quadrilateral']
My "Hello World" of Machine Learning
The trading problem
Price change (5 min) | Signal |
---|---|
Significant* increase | Buy |
No significant* change | Hold |
Significant* decrease | Sell |
* more than a transaction fee would cost
What I used
Few years of historical data
about 70 BTC/altcoin markets
The simulation
- Train the classifier using data from 1 market, run simulations on remaining markets, manually review results
- Always assume the worst case transaction fees (0.25%)
- Assume starting investment portfolio of $10 worth of Bitcoin (back then ~0.008 BTC)
First simulations
BTC/DGB (Digibyte), 02/2015 - 04/2017
Problem: too many unprofitable trades
BTC/FCT (Factom), 10/2015 - 04/2017
Problem: too few trade signals over years
What I tried to improve the model
- extracted more features from my dataset (Technical Analysis indicators)
- tried different classifiers/parameters
- basically followed my gut while brute forcing different possibilities and comparing results
Technical analysis
In finance, technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.
https://en.wikipedia.org/wiki/Technical_analysis
http://blueeconomy.net/wp-content/uploads/2016/01/forex-technical.png
- Single, Weighted Moving Averages
- Momentum
- Relative Strength Index
- Commodity Channel Index
- Stochastic Oscillator
- Moving Average Convergence/Divergence Oscillator
- Williams %R
- Accumulation/Distribution oscillator
- On Balance Volume
- Aroon
- Average True Range
Some of technical indicators I have been using during the training:
* I don't understand what most of these are for
Different algorithms I used for training
(with scikit-learn switching from one to another is really simple)
* I don't understand what most of these are for
from sklearn.discriminant_analysis \
import LinearDiscriminantAnalysis, QuadraticDiscriminantAnalysis
from sklearn.ensemble import RandomForestClassifier,
AdaBoostClassifier
from sklearn.naive_bayes import GaussianNB
from sklearn.neighbors import KNeighborsClassifier
from sklearn.svm import SVC
The best algorithm
in my case: AdaBoost
AdaBoost is exactly like human specialization. Get person (weak learner) A to learn problem X. Whatever part of X A is not good at, get person B to learn that subset. Whatever A and B are not good at, get C to learn that. And so on. Each learner specializes in the weakest area that needs the most improvement.
https://www.reddit.com/r/MachineLearning/comments/1jcx2a/an_eli5_explanation_of_adaboost/cbdhb4d/?st=j3ulo3je&sh=a9a90fee
Simulations after improvements
BTC/BTCD (BitcoinDark), 06/2014 - 04/2017
Start: 0.008 BTC | Exit: >100 BTC
BTC/BCN (Bytecoin), 05/2014 - 04/2017
Start: 0.008 BTC | Exit: 4 * 10^45 BTC
BTC/EXP (Expanse), 03/2014 - 04/2017
Start: 0.008 BTC | Exit: ~ 1.25 BTC
How it went in production
- Simulation =/= reality
- Slowly losing money over time
- After a few tweaks it sometimes gained money but still kept losing it faster
- Sudden change in API rate limits enforced by the exchange over time made it impossible to continue the experiment
Conclusion: the pre-alpha doesn't look ready but I expected it to be much worse
How it went in production
- Timeframe - 6 weeks
- Lost about $10 (~3 Grander Texas burgers)
- Learned a thing or two about machine learning and how markets work
- Success: managed to improve the simulated results dramatically
- One of the most exciting side-projects I have been working on
- Got a lot of great ideas about improving the project that could consume hundreds of hours
Summary
Thank you
Applying Machine Learning in Cryptocurrency Trading
By Paweł Duda
Applying Machine Learning in Cryptocurrency Trading
- 2,170