Introduction to FX Data Mining

Andrew KreimerAlgonell – Scientific FX

Trading

FX, FOREX or Foreign Exchange Market• The biggest market in the world

• (~5 trillion) daily trading volume (2015)

• 5 days a week, 24 hours a day, Monday – Friday

• Players: three main levels• Banks, Investment Companies

• Brokers

• Traders

• Speculative nature – most of the trading is just for the difference

• The simple goal - gain difference in pips (1/10000 change of price)• Buy low, sell high (Long)

• Buy EURUSD @ 1.01000 and then Sell @ 1.02000 +100pips gain

• Sell high, buy low (Short)

• Sell EURUSD @ 1.01000 and then Buy @ 1.00000 +100pips gain

Data Mining and Machine Learning• Data Mining

• Massive amounts of data (We have it in FX)

• Non trivial extraction of knowledge from data (We need it in FX)

• Data Mining methods• Classification – spam & fraud detection• Association – YouTube & Amazon• Clustering – unstructured data• Process Mining – log mining• Text Mining – news mining

• Machine Learning• Algorithms for knowledge discovery• Neural Networks (Widely used in FX)• Random Forest (Not appreciated as should be)• Linear Regression (Too simple, but well known)

Algorithmic Trading or Quantitative Investment• Trading algorithm

• Mathematics: Fibonacci, Chebysheb, Markov and etc.

• Data Mining

• Trading automatically

• Programming language: MQL, Java, C#, LUA, C++ and etc.

• No psychology

• Speed and robustness

• Deterministic

• Note: in this case it’s long term rather than HFT

Algorithmic FX Trading and Data Mining• Historical Data

• GIGO – Garbage In Garbage Out

• Broker or Yahoo Finance?

• Programming skills and continuous debugging

• Creating ,implementing and testing (Currently done manually).

• Trial and Error – Explore!

WEKA – Waikato Environment for Knowledge Analysis• Open Source Data Mining framework

• University of Waikato, Hamilton, New Zealand

• Provides • Implementation of Machine Learning algorithms

• Data preprocessing filters

• Data visualization

• Software• http://www.cs.waikato.ac.nz/ml/weka/

• Book • Data Mining: Practical Machine Learning Tools and Techniques, Third Edition (The

Morgan Kaufmann Series in Data Management Systems) by Ian H. Witten et al.

• http://amzn.com/0123748569

Loading numerical data to WEKA

Numerical visualization in WEKA

Predicting Close Price with Random Forest

Loading nominal data to WEKA

Nominal visualization in WEKA

Clustering entry points with Simple K Means

Summary• FX trading has infinite

number of trading systems

• Data Mining can help us in creating unique trading models

• Tools and data are available

• Good luck with the mining!

Profit

FX

Data Mining

Historical Data

Algorithmic Trading

That’s all folks!Algonell – Scientific FX Tradingwww.algonell.com