Feature Engineering & Feature Selection

Feature Engineering & Feature Selection

How to apply modern Machine Learning on Volume Spread Analysis (VSA).Following up the previous posts in these series, this time we are going to explore a real Technical Analysis (TA) in the financial market. For a very long time, I have been fascinated by the inner logic of TA called Volume Spread Analysis (VSA). I have found no articles on applying modern Machine learning on this time proving long-lasting technique.

WarningThere is no magical formula or Holy Grail here, though a new world might open the door for you.


📈Python for finance series

  1. Identifying Outliers
  2. Identifying Outliers — Part Two
  3. Identifying Outliers — Part Three
  4. Stylized Facts
  5. Feature Engineering & Feature Selection
  6. Data Transformation

Following up the previous posts in these series, this time we are going to explore a real Technical Analysis (TA) in the financial market. For a very long time, I have been fascinated by the inner logic of TA called Volume Spread Analysis (VSA). I have found no articles on applying modern Machine learning on this time proving long-lasting technique. Here I am trying to throw out a minnow to catch a whale. If I could make some noise in this field, it was worth the time I spent on this article.

Especially, after I read David H. Weis’s Trades About to Happen, in his book he described:

“Instead of analyzing an array of indicators or algorithms, you should be able to listen to what any market says about itself.”¹

To closely listen to the market, as also well said from this quote below, just as it may not be possible to predict the future, it is also hard to neglect things about to happen. The key is to capture what is about to happen and follow the flow.

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But how to perceive things about to happen, a statement made long ago by Richard Wyckoff gives some clues:

“Successful tape reading [chart reading] is a study of Force. It requires ability to judge which side has the greatest pulling power and one must have the courage to go with that side. There are critical points which occur in each swing just as in the life of a business or of an individual. At these junctures it seems as though a feather’s weight on either side would determine the immediate trend. Any one who can spot these points has much to win and little to lose.”²

feature-engineering feature-selection trading python machine-learning

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