
Machine learning predictions for QM eMini Crude Oil - madchops1
https://www.dutchess.ai/results/
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tiredfatdude
If you glance over the whitepaper, it's obvious this is a completely
ridiculous model. Trying to predict intraday price movements with previous day
volume numbers and open interest as features? Please. Also, selling the
"model" predictions for $365 a year is the real scam -- if he had any
confidence in the model, he'd get a private backer and be trading size out of
his own account rather than making $50 bets.

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sireat
I mean it is possible that the model could work for someone with access to
more capital and better fee structure than OP making $50 bets.

Still, this seems like a model that will likely work about 95% then fail on
outliers ie "picking pennies in front of a bulldozer" model.

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HockeyPlayer
A strategy that goes long or short QM doesn't have an asymetrical return
profile. I.e., it isn't "picking up pennies". An example of that is selling
options.

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madchops1
Thanks HockeyPlayer spot on.

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tiredfatdude
I think you misunderstand, what you're doing is even worse than picking up
pennies, your strategy just boils down to punting futures with no hedge or any
form risk management to your open position. You're just gambling on coinflips.
If you backtest your "model" you'll find that external macro event induced
crude oil moves will completely wipe you out because you have no hedge against
them.

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madchops1
Your are correct about no hedge agains outlying macro events. But I'm not
suggesting using this without any other variables in your trading decision. It
may help make a trading decision.

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financedude
The OP says "I don't see why I can't trade it AND share it as well to get
multiple streams of revenue?"

Maybe because the capacity of day hold futures (especially e-micro crude) is
so small that there is almost no way that the revenues earned from your 365 a
year subscribers is going to be greater than the decreased capacity of your
strategy from having all those people trading it.

As someone who works at a quant fund, this kind of shit pisses me off to no
end. It makes a legit industry look like Herbalife

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madchops1
I don't really have a strategy to copy. I just provide indicators that may
affect how you decide to make a trade or not.

Also the point of this project is to get machine models that evaluate below
baseline by improving the analysis of time-series data. I spent a lot of time
improving the quality until they became better than baseline. Like I said I do
not have a crystal ball or strategy for sale. Just insights from pattern
recognition of historical time-series data that has helped me trade so I'm
putting it out there.

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d--b
OP: how can you expect to be taken seriously if you don't publish backtests,
and overfitting analysis?!

It is _extremely_ likely that your model's guesses are just as bad as coin
flips.

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madchops1
I will do this thank you for your feedback. I didn't release my results until
my models were better than baseline in evaluation. Hence better than flipping
a coin. I published the results of my evaluations so you can see that. Its not
a crystal ball. Its an indicator to help in trading decisions.

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JackFr
That's how Simons did it at Renaissance. He sold his model for $365 a year.

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madchops1
I did not know that. Thanks for the info.

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lowdest
This is all a bit naive, OP is not up to speed with the state of the art. This
looks like any number of student projects that are created every semester.

The best thing about this is that it looks like OP prototyped and released v1
for sale in under a month. That's respectable.

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madchops1
It may be a bit naive. going to keep working on this and I have found my
indicators to greatly increase my own trading results and making the models
evaluation numbers improve is very exciting and interesting to me and maybe
others.

Thanks for the one compliment :)

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madchops1
Also my models beat baseline in evaluations so I'm stoked on that. It took
some doing to produce results with time-series data.

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gwbas1c
It's been about a decade since I worked with machine learning, and even then I
hardly scratched the surface. (I mostly wrote the data access and glue code
for someone else's machine learning system.)

Given what I see, it's really hard (for me) to understand what's going on and
what's novel. I'm not very active in the financial or machine learning area.
All I can understand is that someone wrote an investment program that makes
money.

Even with my limited knowledge of machine learning, I know that it's very easy
to confuse luck and success. How do you know that you're not just lucky? How
do you know that your computer program is really investing, and not just "good
timing"?

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madchops1
I am not trading purely on these numbers. They are indicators they help me
make my trading decisions and I think they may help others too.

My models evaluations are performing better than baseline when trained with
70% of the data and evaluated against the remaining 30% so I take that as
value. As someone else put it a potentially "favorable guess". At this point
I'm using the predictions regularly. And I guess I'll know more the longer I
keep track of daily results.

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madchops1
Updated White Paper. Generated more evaluations and back tests.
[https://s3.amazonaws.com/karlcdn/Dutchess.ai+White+Paper.pdf](https://s3.amazonaws.com/karlcdn/Dutchess.ai+White+Paper.pdf)

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madchops1
I know a lot of you hate this but the model has correctly predicted the
correct direction of movement at end of day 9 out of 11 days since my model
was under baseline and I began publishing my results. I know I've said this a
few times but its not a crystal ball, its a value that can assist in trading
decisions.

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gwbas1c
11 days is a very short time. Assume that you're lucky.

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madchops1
Thats also what the evaluation of an ML model is for.

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madchops1
I did another back test with a randomly selected 70%/30% training to
evaluation ratio for evaluating time-series models. Adding results to
whitepaper. The results are still under baseline.

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k3oni
Couple questions:

1\. Why QM?

2\. Was this tried on any other future and if yes what was the outcome?

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madchops1
I have been trading QM for a year or two now. It has low margin and good
volatility for day trading. The tick value is 12.50. So movement of one tick
will cover your trade costs. So it makes it possible for a beginner to start
with ~$3-5000 and still be able to realistically make money.

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cardmagic
Trading costs are more than just commission. Slippage for QM is higher than CL
because of thinner volume and can easily be $10-25+ per order ($20-50 round
trip). You might say that you don’t worry about slippage because you use limit
orders, but limit orders have their own problems, like not getting filled
which can easily screw up your returns vs predicted returns. Be careful, there
are far more ways to lose money trading than you seem to realize still.

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madchops1
Also doing random not sequential training and evaluation. The proper way to
eval time-series models.

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madchops1
I am doing my training/evaluation with a data split of 70/30\. Doesn't that
qualify as a proper backtest?

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soVeryTired
What is this I don't even

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madchops1
Working on a tutorial...

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daveguy
I may not be reading this right, but does the white paper contain 5 days of
result data?

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madchops1
ya it contains the evaluation results of the model and 5 days of result data.

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thinkmilitant
The ever-relevant xkcd - [https://xkcd.com/1570/](https://xkcd.com/1570/)

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madchops1
Lol.

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madchops1
I love xkcd.

