Trade When Opportunity Comes: Price Movement Forecasting via Locality-Aware Attention and Iterative Refinement Labeling

26 Jul 2021  ·  Liang Zeng, Lei Wang, Hui Niu, Ruchen Zhang, Ling Wang, Jian Li ·

Price movement forecasting aims at predicting the future trends of financial assets based on the current market conditions and other relevant information. Recently, machine learning (ML) methods have become increasingly popular and achieved promising results for price movement forecasting in both academia and industry. Most existing ML solutions formulate the forecasting problem as a classification (to predict the direction) or a regression (to predict the return) problem over the entire set of training data. However, due to the extremely low signal-to-noise ratio and stochastic nature of financial data, good trading opportunities are extremely scarce. As a result, without careful selection of potentially profitable samples, such ML methods are prone to capture the patterns of noises instead of real signals. To address this issue, we propose a novel price movement forecasting framework named LARA consisting of two main components: Locality-Aware Attention (LA-Attention) and Iterative Refinement Labeling (RA-Labeling). (1) LA-Attention automatically extracts the potentially profitable samples by attending to label information. Moreover, equipped with metric learning techniques, LA-Attention enjoys task-specific distance metrics and effectively distributes attention to potentially profitable samples. (2) RA-Labeling further iteratively refines the noisy labels of potentially profitable samples, and combines the learned predictors robust to the unseen and noisy samples. In a set of experiments on three real-world financial markets: stocks, cryptocurrencies, and ETFs, LARA significantly outperforms several machine learning based methods on the Qlib quantitative investment platform. Extensive ablation studies and experiments also demonstrate that LARA indeed captures more reliable trading opportunities.

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