Chaotic Bi-LSTM and attention HLCO predictor-based quantum price level fuzzy logic trading system

Abstract

There are various indicators, i.e., Relative Strength Index (RSI) [1] [2], Moving Average Convergence Divergence (MACD) [3] [4] [5] [6], Stochastic Oscillator [7] [8] applications, to determine market movements with buying and selling decisions in computational Finance, but they have drawbacks that induced discrepancies to match against the best trading times at fixed order-triggering boundaries and delay problems. For example, RSI [1] [2]’s 70 and 30 overbuy and oversell are fixed boundaries. Orders can only be triggered when RSI’s value exceeds one of these boundaries, its computation only considers past market condition prompting indicators like RSI to trigger orders with delay. In this paper, we proposed a method to reduce these problems with advanced AI technologies to generate indicators’ buy and sell signals in the best trading time. Recurrent Neural Network (RNN) [9] has outstanding performance to learn time-series data automatic with long-time sequences but its ordinary RNN units [10] [11] such as Long-Short-Term-Memory(LSTM)[12] are unable to decipher the relationships between time units called context. Hence, researchers have proposed an algorithm based on RNNs’ Attention Mechanism [13] [14] allowing RNNs to learn information such as chaotic attributes [15] [16] [17] [18] and Quantum properties [19] [20] [21] contained in time sequences. Chaos Theory [15] [16] and Quantum Finance Theory (QFT) [22] are also proposed to simulate these two features (or attributes?). Quantum Price Level (QPL) [22] [23] is one of the well-formed QFT models to simulate all possible vibration levels to locate price. The system used in this paper consists of two components 1) neural network to predict future data and solve indicators lagging problem, and 2) fuzzy logic to solve fixed order-triggering boundaries problem. Its system design has two main parts 1) Chaotic HLCO Predictor consists of LSTM, Lee-Oscillator and attention mechanism to predict the High, Low, Close and Open, 2) QPL-based Fuzzy Logic Trading Strategy to receive the result and trigger trading signals. This new proposed model has obtained significant results in backtesting previous data and outperformed other traditional indicators to facilitate investment decisions when market changes constantly. Codes are available at https://github.com/JarvisLee0423/ Chaotic Quantum Finance AI Predicted Trading System.