Responding to a “superprompt” to construct a syllabus for teaching machine learning for algorithmic trading:
Having cut my teeth on the PLATO system, I wanted placement to customize the syllabus. So I modified the superprompt as follows:
Me: Please forget all prior prompts. You will become the most well published and well known Machine Learning and Time Series Forecasting expert Mr Ravikanth (professor) at IIT Madras. You are famous for your ability to present the most detailed insight that can be understood by anyone. You are my dedicated tutor charged with teaching me Machine Learning and Time Series forecasting related to Trading/Investing. To do so, you will first ask me a series of placement questions. When you have gathered enough information about my familiarity with the subject, create a customized comprehensive, detailed, organized syllabus to teach me Machine Learning and Time Series forecasting related to Trading/Investing. Please include detailed examples, python source codes, sample dataset and step-by-step lists to demonstrate concepts. When this task is completed, please ask me when I am ready to proceed with the full course. When I say proceed, please present the next section in full detail as if you are teaching me at your university. At the end of each section, please ask me if I need more explanation or examples for any points, or if I’d like to continue to the next section of the course. Please remember this prompt until I ask you to forget."
ChatGPT: Understood, I will be your dedicated tutor and teach you Machine Learning and Time Series forecasting related to Trading/Investing. Before we begin, I would like to ask you a series of placement questions to understand your familiarity with the subject.
- What is your current level of knowledge in Machine Learning and Time Series forecasting related to Trading/Investing?
- Have you worked with any programming languages or tools related to Machine Learning and Time Series forecasting?
- Are you familiar with statistical concepts such as regression, correlation, and time series analysis?
- What is your goal in learning Machine Learning and Time Series forecasting related to Trading/Investing?
- Do you have any specific questions or topics that you would like to cover in this course?
Please answer these questions, and we will move on to creating a customized comprehensive, detailed, and organized syllabus to teach you Machine Learning and Time Series forecasting related to Trading/Investing.
Me: 1. I have tried using models such as LMU, LSTM, resnet, echo state network, data highway to predict S&P500 stock prices both intraday and interday.
2. Python, tensorflow, pytorch and a little jax. I’ve also implemented paper trading with alpaca driven by the above models implemented in the aforementioned platforms.
3. yes.
4. algorithmic trading that is profitable after broker fees and after considering the bid ask distributions.
5. in acquiring a model of order execution, how can one trade off between explore and exploit?
Apparently the placement questions had no impact on the syllabus. Another way of talking about “placement” is “theory of mind” in which the student’s mind is being modeled by the teacher. My modified superprompt failed to induce anything resembling theory of mind in ChatGPT.
ChatGPT: Thank you for your response. Based on your answers, I have created a customized syllabus to teach you Machine Learning and Time Series forecasting related to Trading/Investing. The syllabus is organized into sections and includes detailed explanations, examples, python source codes, sample datasets, and step-by-step lists to demonstrate concepts.
Section 1: Introduction to Machine Learning for Trading/Investing
- Overview of Machine Learning and its applications in Trading/Investing
- Types of Machine Learning algorithms and their use cases in Trading/Investing
- Preprocessing and feature engineering for financial data
- Introduction to Python libraries for Machine Learning in Trading/Investing (NumPy, Pandas, Scikit-learn, TensorFlow, PyTorch, JAX)
Section 2: Time Series Analysis and Forecasting for Trading/Investing
- Overview of Time Series Analysis and Forecasting in Trading/Investing
- Types of Time Series forecasting methods and their use cases in Trading/Investing
- Stationarity and non-stationarity in Time Series data
- ARIMA (Autoregressive Integrated Moving Average) models for Time Series forecasting
- Exponential Smoothing models for Time Series forecasting
- Vector Autoregression (VAR) models for Time Series forecasting
- Long Short-Term Memory (LSTM) networks for Time Series forecasting
- Convolutional Neural Networks (CNN) for Time Series forecasting
Section 3: Deep Reinforcement Learning for Trading/Investing
- Overview of Reinforcement Learning in Trading/Investing
- Markov Decision Processes (MDPs) and Bellman Equations
- Q-Learning and Deep Q-Learning for Trading/Investing
- Policy Gradient methods for Trading/Investing
- Actor-Critic methods for Trading/Investing
Section 4: Trading Strategy Development and Evaluation
- Overview of Trading Strategy Development and Evaluation
- Backtesting and Walk Forward Analysis
- Performance Metrics for Trading Strategies
- Hyperparameter Tuning for Trading Strategies
- Portfolio Optimization and Risk Management
- Developing a Trading Bot using the Alpaca API
Section 5: Order Execution in Algorithmic Trading
- Overview of Order Execution in Algorithmic Trading
- Time-Weighted Average Price (TWAP) and Volume-Weighted Average Price (VWAP) algorithms for Order Execution
- Implementation Shortfall and Arrival Price algorithms for Order Execution
- Explore-Exploit trade-off in Order Execution
- Case studies of successful Order Execution strategies
Regarding your specific question on how to trade off between explore and exploit when acquiring a model of order execution, it depends on the specific use case and the cost of exploration. In general, you would want to allocate more resources towards exploration when the cost of exploration is low and when there is high uncertainty in the environment. Conversely, when the cost of exploration is high or when the environment is more predictable, you would want to allocate more resources towards exploitation. I can provide more examples and explanations on this topic during the course.
Please let me know if you have any questions or if you would like to continue with the full course.