2025
Enhancing Investment Performance of the Ichimoku Cloud with the XGBoost Machine Learning Algorithm
In financial markets, technical analysis has long been a crucial tool for investors to assess market trends and develop trading strategies. Among these techniques, the Ichimoku Kinko Hyo (Ichimoku Cloud) utilizes five moving averages and a cloud structure to analyze stock support, resistance, and trend changes, enabling traders to quickly identify bullish or bearish signals. However, traditional Ichimoku strategies rely on fixed parameters (9-26-52) and visual interpretation, making them inflexible in adapting to different market conditions. Additionally, in choppy market conditions, Ichimoku-based signals can generate false positives, leading to erroneous trades and capital drawdowns.
With the advancement of machine learning, XGBoost (Extreme Gradient Boosting) has become one of the most widely used models in quantitative trading. By leveraging Gradient Boosting Decision Trees (GBDT), XGBoost learns complex high-dimensional relationships between different data points and enhances the filtering and decision-making process of trading signals. Compared to purely relying on technical indicators, XGBoost can integrate various market variables—such as price momentum, volume changes, and market sentiment—to uncover relationships between data and future stock returns. This ultimately improves the accuracy and robustness of trading strategies.