Paper: arXiv 2405.14262

Abstract

This paper investigates the potential of Bayesian optimization (BO) to optimize the atr multiplier and atr period -the parameters of the Supertrend indicator for maximizing trading profits across diverse stock datasets. By employing BO, the thesis aims to automate the identification of optimal parameter settings, leading to a more data-driven and potentially more profitable trading strategy compared to relying on manually chosen parameters. The effectiveness of the BO-optimized Supertrend strategy will be evaluated through backtesting on a variety of stock datasets.

Complexity vs Empirical Score

  • Math Complexity: 5.5/10
  • Empirical Rigor: 6.0/10 (capped from 6.5: transaction costs not modelled; see penalty flags)
  • Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper applies Bayesian optimization, which involves probabilistic modeling and Gaussian processes (advanced math), while also evaluating the optimized strategy via backtesting on multiple stock datasets with performance metrics like profit factor and maximum drawdown, indicating significant empirical implementation.

Research Flowchart

  flowchart TD
  A["Research Goal:<br>Optimize Supertrend Parameters<br>via Bayesian Optimization"] --> B["Input: Diverse Stock Datasets"]
  B --> C["Method: Bayesian Optimization<br>Search Space: ATR Multiplier & Period"]
  C --> D["Process: Backtesting<br>Evaluated for Trading Profits"]
  D --> E{"Comparison: BO-Optimized vs<br>Manual Parameters"}
  E -->|Outcome| F["Key Finding:<br>Data-Driven Strategy with<br>Maximized Returns"]
  E -->|Outcome| G["Key Finding:<br>Automated Parameter Identification"]

Cited References (14)

  1. Real-time segmentation of on-line handwritten arabic script (2014)
  2. A Study of Key Technical Indicators for Effective and Profitable Strategy in Option Trading of Nifty (2022)
  3. Fast classification of handwritten on-line Arabic characters (2014) — link
  4. A Study of Key Technical Indicators for Effective and Profitable Strategy in Option Trading of Nifty (2022)
  5. Performance Analysis of Supertrend Trading Strategy on Indian Stock Market (2017)
  6. A Comparative Study of Supertrend and Moving Average Crossover Trading Strategies (2016)
  7. Optimizing Trading Strategies with Bayesian Optimization (2020)
  8. Bayesian Optimization for Algorithmic Trading (2016)
and 6 more
  1. Taking the Human Out of the Loop: A Review of Bayesian Optimization (2016) — link
  2. New technique for stock trend analysis-volume-weighted squared moving average convergence and divergence (2023) — link
  3. Balanced baskets: A new approach to trading and hedging risks (2012) — link
  4. Deep reinforcement learning pairs trading with a double deep Q-network (2020) — link
  5. Ensembling and dynamic asset selection for risk-controlled statistical arbitrage (2021) — link
  6. Stock price prediction using time series, econometric, machine learning, and deep learning models (2021)

0 of 14 cited works are in the corpus; resolved via arXiv source bundles, Semantic Scholar and OpenAlex. Corpus-wide: 2518 linked papers.