EEG-Based Emotion Classification in Financial Trading Using Deep Learning: Effects of Risk Control Measures.

Day traders in the financial markets are under constant pressure to make rapid decisions and limit capital losses in response to fluctuating market prices. As such, their emotional state can greatly influence their decision-making, leading to suboptimal outcomes in volatile market conditions. Despite the use of risk control measures such as stop loss and limit orders, it is unclear if these strategies have a substantial impact on the emotional state of traders. In this paper, we aim to determine if the use of limit orders and stop loss has a significant impact on the emotional state of traders compared to when these risk control measures are not applied. The paper provides a technical framework for valence-arousal classification in financial trading using EEG data and deep learning algorithms. We conducted two experiments: the first experiment employed predetermined stop loss and limit orders to lock in profit and risk objectives, while the second experiment did not employ limit orders or stop losses. We also proposed a novel hybrid neural architecture that integrates a Conditional Random Field with a CNN-BiLSTM model and employs Bayesian Optimization to systematically determine the optimal hyperparameters. The best model in the framework obtained classification accuracies of 85.65% and 85.05% in the two experiments, outperforming previous studies. Results indicate that the emotions associated with Low Valence and High Arousal, such as fear and worry, were more prevalent in the second experiment. The emotions associated with High Valence and High Arousal, such as hope, were more prevalent in the first experiment employing limit orders and stop loss. In contrast, High Valence and Low Arousal (calmness) emotions were most prominent in the control group which did not engage in trading activities. Our results demonstrate the efficacy of our proposed framework for emotion classification in financial trading and aid in the risk-related decision-making abilities of day traders. Further, we present the limitations of the current work and directions for future research.

Modeling Bitcoin Prices using Signal Processing Methods, Bayesian Optimization, and Deep Neural Networks.

Bitcoin is a volatile financial asset that runs on a decentralized peer-to-peer Blockchain network. Investors need accurate price forecasts to minimize losses and maximize profits. Extreme volatility, speculative nature, and dependence on intrinsic and external factors make Bitcoin price forecast challenging. This research proposes a reliable forecasting framework by reducing the inherent noise in Bitcoin time series and by examining the predictive power of three distinct types of predictors, namely fundamental indicators, technical indicators, and univariate lagged prices. We begin with a three-step hybrid feature selection procedure to identify the variables with the highest predictive ability, then use Hampel and Savitzky-Golay filters to impute outliers and remove signal noise from the Bitcoin time series. Next, we use several deep neural networks tuned by Bayesian Optimization to forecast short-term prices for the next day, three days, five days, and seven days ahead intervals. We found that the Deep Artificial Neural Network model created using technical indicators as input data outperformed other benchmark models like Long Short Term Memory, Bi-directional LSTM (BiLSTM), and Convolutional Neural Network (CNN)-BiLSTM. The presented results record a high accuracy and outperform all existing models available in the past literature with an absolute percentage error as low as 0.28% for the next day forecast and 2.25% for the seventh day for the latest out of sample period ranging from Jan 1, 2021, to Nov 1, 2021. With contributions in feature selection, data-preprocessing, and hybridizing deep learning models, this work contributes to researchers and traders in fundamental and technical domains.