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RE: Want to make own trading bot? You should check Markov Chains
The only issue with using Markov chains to trade is that they are vulnerable to events they have never seen. There are few methods that attempt to address this issue (back-off smoothing), but even still these models are fragile to low probability, high impact events
Thanks for your input. That's why it program should collect data as long as possible so the probability of occurrence of an unknown event will be as low as possible.
I agree, but I also add that you should probably add some risk-controls and monitor the model to avoid losing money during rare events.
I agree, the biggest problem in algos is still the uncexpected big fundamental news and sudden changes in market sentiment. Maybe more development in quantitative data gathering/analysis and model of neuron networks will bring up more and more flexible algos in the future.