Optimizing Foreign Exchange Trading Performance Through Reinforcement Machine Learning Framework

Ervin Gubin Moung, Maisarah Mohd Sufian, Ali Farzamnia, Hani Yasmin binti Murnizam, Valentino Liaw, Lorita Angeline

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

Abstract

The ever-changing financial market of foreign exchange attracts many traders. Traders must make wise decisions to avoid significant losses when buying and selling currencies. This project intends to reduce the chance of suffering from loss by providing a trading strategy. The research on developing a trading strategy specifically for the foreign exchange market is still lacking due to the limitation in selecting the best model to create a trading strategy, which is still a working area. Even with current research on trading strategy, it tends not to work overtime due to unpredictable market trends. Therefore, this paper proposed three models using the algorithms A2C, PPO & DQN to find the best strategy in foreign exchange trading, analyze the impact of individual features on the trading strategy and identify the most influential features to develop the best trading strategy using reinforcement learning and finally evaluate the performance on unseen data using Sharpe Ratio, Sortino Ratio, Omega Ratio, Profit & Loss (%), Maximum Drawdown (%) and Cumulative Score. The experiment result showed that the PPO algorithm performed best on 2 of the currency pairs which is GBP/USD and USD/JPY, with a Sharpe Ratio of 0.23 and 0.70, respectively, and a Profit & Loss of 7.4% and 16.78%, respectively, when tested on unseen data. Meanwhile, when tested on unseen data, the A2C model performed the best on the EUR/USD currency pair with a Sharpe Ratio of 0.16 and a Profit & Loss of 3.34%.

Original languageEnglish
Title of host publication2024 14th International Conference on Computer and Knowledge Engineering
Subtitle of host publicationICCKE 2024
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages278-283
Number of pages6
ISBN (Electronic)9798331511272
ISBN (Print)9798331511289
DOIs
Publication statusPublished - 18 Feb 2025
Event14th International Conference on Computer and Knowledge Engineering - Mashhad, Iran, Islamic Republic of
Duration: 19 Nov 202420 Nov 2024
Conference number: 14

Publication series

NameInternational Conference on Computer and Knowledge Engineering, ICCKE
PublisherIEEE
ISSN (Print)2375-1304
ISSN (Electronic)2643-279X

Conference

Conference14th International Conference on Computer and Knowledge Engineering
Abbreviated titleICCKE 2024
Country/TerritoryIran, Islamic Republic of
CityMashhad
Period19/11/2420/11/24

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