English

Asynchronous Deep Double Duelling Q-Learning for Trading-Signal Execution in Limit Order Book Markets

Trading and Market Microstructure 2023-09-27 v2 Machine Learning

Abstract

We employ deep reinforcement learning (RL) to train an agent to successfully translate a high-frequency trading signal into a trading strategy that places individual limit orders. Based on the ABIDES limit order book simulator, we build a reinforcement learning OpenAI gym environment and utilise it to simulate a realistic trading environment for NASDAQ equities based on historic order book messages. To train a trading agent that learns to maximise its trading return in this environment, we use Deep Duelling Double Q-learning with the APEX (asynchronous prioritised experience replay) architecture. The agent observes the current limit order book state, its recent history, and a short-term directional forecast. To investigate the performance of RL for adaptive trading independently from a concrete forecasting algorithm, we study the performance of our approach utilising synthetic alpha signals obtained by perturbing forward-looking returns with varying levels of noise. Here, we find that the RL agent learns an effective trading strategy for inventory management and order placing that outperforms a heuristic benchmark trading strategy having access to the same signal.

Keywords

Cite

@article{arxiv.2301.08688,
  title  = {Asynchronous Deep Double Duelling Q-Learning for Trading-Signal Execution in Limit Order Book Markets},
  author = {Peer Nagy and Jan-Peter Calliess and Stefan Zohren},
  journal= {arXiv preprint arXiv:2301.08688},
  year   = {2023}
}