Intelligent Trading Systems

Martin Sewell (martin@msewell.force9.co.uk)
Wed, 21 Oct 1998 12:19:02 +0200 (MET DST)

Hello Everyone

I am about to embark on a PhD in Intelligent Trading Systems, but am being
held back due to lack of a definite sponsor. I have a degree in Maths, a
degree in Computing and experience of FX and commodity trading and am
desperate to find a bank to sponsor me. It would be, among other things, an
extremely cost effective way of gaining access to some of the top academics
in this field. I am happy to submit a project proposal before any financial
commitment is made. If you can help, or have any suggestions, I would be
most grateful to hear from you. Below is an introduction to the topic.

The three key technologies employed by intelligent systems today are neural
networks, genetic algorithms and fuzzy logic. These are more recent
developments than the previous generation of such systems, which relied on
expert systems, although expert systems are often used as the shell for
other technologies. In the last few years the most popular method was to
build the system around neural networks. These, however, were of limited
success. Although a useful tool for many applications, neural networks tend
to fail if applied to financial markets because the markets are too
'difficult'. That is, they tend to be nearly, but not quite, random. The
other main drawback to neural networks is the lack of explanation
capabilities. It is difficult to explain how and why neural networks arrive
at the results that they produce.

The key technology that we will employ is the genetic algorithm (GA). As
each technology has inherent strengths and limitations, they are often
combined, using the object-oriented paradigm to produce an Intelligent
Hybrid System. We will therefore employ fuzzy logic as the front end of our
system if necessary.

Although not an aspect of artificial intelligence, there is a branch of
mathematics that has been making increasing contributions to our knowledge
of the markets in recent years. Nonlinear dynamics has the ability to
identify the existence of chaos in a market, and can give us an indication
of when short-term predictability should be possible and also help us choose
optimal parameters when designing a trading system.

Thanking you in advance for any help.

Martin Sewell
London, UK
0181-343 4708
martin@msewell.force9.co.uk

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