Is a trading strategy ever complete without using machine learning?

[Solomon Anietie Sunday]

Recently I have seen a lot of traders training more and more ML models everyday, but I am also wondering if this has always been the case for creating trading strategies. I know that machine learning models are good for regime detection, and identifying anomalies (among other things).

So, can these improvements be made using pure rule-based algorithmic approach or is machine learning something that cannot be avoided when creating a truly robust strategy. What are your thoughts based on what you have seen or heard?

[Ryan L Johnson]

Solomon Anietie Sunday:

Recently I have seen a lot of traders training more and more ML models everyday, but I am also wondering if this has always been the case for creating trading strategies. I know that machine learning models are good for regime detection, and identifying anomalies (among other things).

So, can these improvements be made using pure rule-based algorithmic approach or is machine learning something that cannot be avoided when creating a truly robust strategy. What are your thoughts based on what you have seen or heard?

Personally, I avoid implementing complex models into trading. Generally speaking, I follow the KISS principle and Murphy's Law which suit me just fine.

I have however, considered using adaptive indicators─one step below machine learning, if you will. Anyway, I've never actually traded one.

[Solomon Anietie Sunday]

Ryan L Johnson #:

Personally, I avoid implementing complex models into trading. Generally speaking, I follow the KISS principle and Murphy's Law which suit me just fine.

I have however, considered using adaptive indicators─one step below machine learning, if you will. Anyway, I've never actually traded one.

Great insight. I also think that when a model, or a trading strategy in general, passes a certain level of complexity, it recedes back to being unprofitable.

I love adaptive indicators too, but if you never traded one before, how are you sure its going to be effective? Backtest results perhaps?

[Ryan L Johnson]

Solomon Anietie Sunday #:

Great insight. I also think that when a model, or a trading strategy in general, passes a certain level of complexity, it recedes back to being unprofitable.

I love adaptive indicators too, but if you never traded one before, how are you sure its going to be effective? Backtest results perhaps?

My initial stage of determining whether or not an indicator is valuable is running it through the Tester to merely visualize it on my desired symbol/chart. As they say, "a picture is worth a thousand words," and a moving chart is more like a moving picture. That works for almost every indicator, e.g., adaptive, repainting, etc. I simply have not seen a readily apparent additional edge in my testing adaptive indicators.

At this point, I'm a bit skeptical of replacing "standard" indicators, that already have an edge over the course a 5 year+ test, with adaptive indicators. I've found that constantly changing the parameters/logic of an indicator in real-time based on very recent live data is somewhat of a crapshoot.

I don't want to confuse adaptive indicators with repainting indicators. Some adaptive indicators can repaint history, but not all adaptive indicators repaint history─the latters simply adapt going forward.