Received December 11, 2020, accepted December 20, 2020, date of publication December 24, 2020,

date of current version January 5, 2021.

Digital Object Identifier 10.1109/ACCESS.2020.3047138

A Decision Support System for Trading in Apple

Futures Market Using Predictions Fusion
SHANGKUN DENG 1 , XIAORU HUANG 1 , JIAHUI WANG 1, ZHAOHUI QIN 1, ZHE FU 2,

AIMING WANG 1 , AND TIANXIANG YANG 3

1 College of Economics and Management, China Three Gorges University, Yichang 443002, China
2 School of History, Beijing Normal University, Beijing 100875, China
3 School of Creative Science and Engineering, Waseda University, Tokyo 169-8555, Japan

Corresponding author: Shangkun Deng (dsk8672@163.com)

This work was supported in part by the National Social Science Foundation of China under Grant 19BGL131.

ABSTRACT In the last decade, High-Frequency Trading (HFT) has become a popular issue in the futures
market, which has attracted much attention from numerous researchers. In this study, an intelligent decision
support system is proposed for apple futures high-frequency trading. First, three eXtreme Gradient Boosting
(XGBoost) based models use the feature inputs from multiple time scales for return and direction prediction.
Then, based on a pre-designed trading rule, the signals of long and short-selling are determined, and
corresponding transactions are executed. In order to retain considerable profits in time and to avoid serious
losses possibly caused by sudden and huge price changes toward the opposite direction as predictions,
a position closing function is implemented in the trading rule. Meanwhile, Particle Swarm Optimization
(PSO) is employed to optimize the parameters of the trading rule as well as the XGBoost parameters.
By evaluating the experimental results, we observed that the proposed approach successfully achieved the
best performance in terms of direction prediction accuracy, transaction returns, as well as return/risk ratio.
It could be inferred from the experimental results that the proposed approach could provide decision support
and beneficial reference for market traders involved in high-frequency trading of the apple futures.

INDEX TERMS Futures market, trading rule, multiple time scale, parameters optimization.

I. INTRODUCTION and supply of apple is sufficient to support highly liquid

In the last two decades, Chinese futures markets have
been rapidly developed. As an important form of Chi-
nese financial market, futures markets have relatively high
liquidity than stock and foreign exchange markets, which
can be used to hedge the trader’s investment portfolios to
prevent unexpected market risks in the future. As a kind of
agricultural commodity futures, the apple futures contract
has been innovated and became the first fruit futures variety
in late 2018, which is traded in Zhengzhou Commodity
Exchange. Similar to other agricultural product futures,
the development of apple futures provides investors with
diversified portfolios, and its function has been used to
guarantee farmers’ income, promote the scale production
and operation of agricultural products and enhance the apple
market trading. Additionally, China’s apple production and
consumption rank first in the world, and the market demand
The associate editor coordinating the review of this manuscript and
approving it for publication was Chun-Hao Chen . stock index futures [2]. Das and Padhy researched the daily
transactions. In order to lower risks, farmers or consumers
who sell or need apples should not only take the over-
the-counter spot market into consideration, but also be
encouraged to conduct hedging or arbitrage transactions in
futures market. Meanwhile, a great number of market traders
and relevant companies have participated in apple futures
trading in recent years. Therefore, accurate forecasting of
apple futures price movement has become extremely crucial
to the benefits of them. Subsequently, it is of great practical
significance for scholars to design and develop an intelligent
decision-making system for apple futures direction prediction
and trading.
In comparison with other financial markets, the risk level
of the futures market has increased significantly due to the
characteristics of larger leverage. There are plenty of studies
that investigated the price predictions in futures markets. For
instance, Hu et al. predicted the prices of crude oil futures [1].
Chen and Pan analyzed the price fluctuation of Chinese

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 S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
closing prices prediction of commodity futures index [3].
Liu considered the technical trading behavior in Chinese
rebar futures market [4]. In addition, Several scholars have
carried out further researches on the agricultural commodity
futures such as wheat, potatoes, cotton, and soybeans [5]–[7].
However, extant literature has done little to research on the
apple futures market.
The technical analysis method generally assumes that
history will repeat [8]–[10], and the market can be predicted
by judging the change of price movement through one or
more technical indicators [11]. For stock prices or futures
prices’ fluctuation analysis, time series analysis method
is one kind of the most commonly used approaches to
predict their future prices. For example, scholars generally
applied autoregressive integrated moving average (ARIMA)
and other analysis methods, and a large amount of liter-
ature that analyzed financial time series prices has been
reported [12], [13]. However, some scholars pointed out
that futures market generally has the characteristics of
nonlinearity, which makes the traditional analysis methods
such as ARIMA produce less ideal prediction results [14].
Therefore, traditional time series analysis methods may be
hardly capable of capturing the complex nonlinear features
hidden in futures market.
In recent twenty years, with the development of machine
learning technologies, plenty of scholars have begun to
adopt a variety of forecasting methods to predict the price
movement of financial markets. Several machine learning
algorithms with powerful learning ability have advantages
over traditional methods in dealing with nonlinear prob-
lems, thus have become increasingly popular for financial
time series movement forecasting. In particular, Support
Vector Machine (SVM) [15] and Artificial Neural Network
(ANN) [16] are widely studied and applied methods in
academic and application fields. For example, Wen et al.
constructed an SVM based method for automatic stock
trading [17]. Lee designed a stock trend prediction system
by an SVM based method [18]. Sewell and Shawe built
a novel SVM based method and applied it to the fore-
casting of foreign exchange rates [19]. Ravichandra and
Thingom have successfully forecasted stock prices using
an ANN based method [20]. Dutta et al. proposed an
ANN based method to forecast the stock price [21]. A lot
of researchers applied SVM or ANN based methods to
predict the financial market with outstanding performance,
and the existing empirical researches have fully proved the
superiority of ANN and SVM over the traditional time series
analysis methods. Although SVM is capable of overcoming
problems such as over-fitting, nonlinearity analysis, and
local minimization, it also encounters several problems. For
instance, some scholars pointed out it often seemed that the
prediction of SVM of the prices just to follow the former
trend [22], [23]. For ANN, it has several main disadvantages,
such as local minimization and overfitting, that makes price
prediction problematic [24], [25]. Compared with SVM
and ANN, an ensemble learning method called Random
1272
Forest (RF) [26] was found to produce superior performance
in many application fields. In the last decade, it has been
applied to financial market forecasting by scholars [27]–[29].
Additionally, deep learning and other advanced techniques
have been applied to stock market forecasting in recent
years [30]–[32]. Furthermore, in 2016, Chen and Guestrin
developed an efficient algorithm called eXtreme gradient
boosting (XGBoost) [33]. Compared with the traditional
RF algorithm, XGBoost has a faster operation speed and
higher prediction accuracy [34]–[36]. Recently, it has been
widely applied in various industries and achieved excellent
realization [37]–[40]. Therefore, owing to the weaknesses
of traditional time series methods and the advantages of
commonly used machine learning methods, this study intends
to employ XGBoost algorithm to predict the movement of
apple futures’ prices, as well as executing simulation trading
in the experiments.
Previous researches generally focused on low-frequency
data, such as daily and weekly prices [41]–[44]. However,
in the past few decades, as an increasing number of
market traders participated in high-frequency transactions,
numerous scholars started to carry out their researches on
high-frequency trading systems [45]–[48]. Compared with
low-frequency trading that generally focuses on daily or
weekly movement, high-frequency trading has the following
characteristics in general: 1) The holding period of a
transaction is relatively short that many positions will be
closed within the same trading day. Thus, it can avoid the
huge risk brought by holding a long-term position; 2) It could
provide more opportunities for trading times, while the
number of low-frequency transactions is relatively fewer.
3) If a better high-frequency trading rule could be found,
the market participants may obtain more opportunities to
produce larger profits. However, since high-frequency trading
requires a fast judgment of market states that may change
rapidly, the trading strategy must be adjusted with changes
in the market state. Therefore, it is necessary to design an
intelligent decision-making system to assist high-frequency
transactions. According to the advantages of high-frequency
trading and the requirements of it, the main aim of this
research is to develop a high-frequency trading system for
application in the apple futures market.
In this research, we factor the possibility that the changes
in price movement direction in the apple futures market may
relate to multiple time scales of features in the historical
price data. Therefore, our proposed approach is conducted
considering not only the return prediction from a moderate
time scale but also return predictions from a relatively long
and a relatively short time scale. Our objective is to enhance
the direction prediction accuracy and profitability through
combining the predicted returns from multiple predictors
using features of multiple time scales. In practice, different
market traders generally would refer to different time scales
of historical data to predict the movement direction for
trading. For instance, for prediction of the trend after ten
days, several market participants would focus on the analysis
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S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
of data from the previous ten days, while others may use
relatively long historical data, such as the previous twenty
days’ price data. Some market participants just focus on
a shorter time scale of historical data, such as five days’
price data. In fact, numerous participants in stock or futures
markets with more trading experience usually would judge
the future trend of price movement from multiple time scales.
Nevertheless, in the previous literature, scholars tended to use
a fixed time scale of the period of historical data to predict
the direction change in the near future, while few considered
to fuse the predictions from multiple time scales. Therefore,
we propose to fill this gap, and the method proposed in
this study will judge the future movement direction of apple
futures’ prices from multiple time scales.
For the design of a trading rule, traders should first deter-
mine the satisfied conditions for the long and short-selling
trading signals. Note that traders do not have to open a
position every time, actually, they generally could wait to
open a position until they consider the conditions are more
confidential. Thus, in the experiments for trading simulation,
the trading rule of the proposed method is designed with
a threshold for long and a threshold for the short-selling
transaction. That is, the comprehensive predicted return
would be compared with those two threshold values. If the
predicted return is larger than the value of long threshold,
the proposed method will open a long position, while it
will open a short-selling position if the predicted return is
smaller than the value of short threshold. Otherwise, there
is no new position to be opened if the predicted return is in
the range of the two threshold values. Additionally, for the
purpose of reducing the risk caused by the sudden market
risk, market participants would often set up a loss stop ratio
in the meanwhile of opening a long or short-selling position.
Similarly, they could set a profit-taking ratio for the sake
of retaining the profit. Therefore, for the model proposed in
this study, the position opening conditions (long or short-
selling), the threshold of long and short-selling, as well as
the rate of profit-taking and loss-stopping are considered in
the trading rules. Consequently, if the losses or earnings of
the proposed method exceed the position closing thresholds,
the position will be immediately closed to take the profit
or cut the loss. Given the pre-designed trading rule, after
executing a long or a short transaction, the position will be
held for at most ten periods of 30 minutes, which is regarded
as an extremely short-term simulation trading. Thus, our
proposed method for prediction and high-frequency trading
does not take into account the impact of seasonality of apple
futures price movement.
For the design of a practical trading rule, the opening
signal, trading threshold, and the proportion of loss stopping
and profit-taking functions all involve parameter setting.
Nonetheless, market participants generally rely on their trad-
ing experience to determine the values of those parameters,
while those parameters may not be optimal. Especially
when multiple parameters are involved and combined in a
sophisticated trading rule, it is quite difficult to infer the
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most reasonable parameter values through traders’ or experts’
experience. In contrast, it would be better to generate a
reasonable trading rule through the back-testing of historical
data and parameter optimization [49], [50]. In a lot of past
literature, Genetic Algorithm (GA) [51] has been applied
to optimize the parameters of the trading rules, and in
many related studies, experimental results have shown that
the trading rule parameter optimization could improve the
trading performance. In recent studies, several scholars also
found that Particle Swarm Optimization (PSO) [52] could
yield superior optimization performance than GA [53]–[55].
In addition to the trading rule, it is mentioned by us that
the results of multiple time scales will be integrated. Thus
the weights of the results of multiple time scales would
also need to be optimized. Moreover, a lot of studies
have shown that the parameters of XGBoost model would
also affect the prediction effect to some extent [56]–[58].
Given the excellent performance in the previous studies,
PSO is integrated into the proposed method for optimizing
the weights of predictions from multiple time scales,
trading strategy parameters, as well as the XGBoost model
parameters. It would be more convincing and accurate to learn
suitable parameters from historical data by using PSO, rather
than selecting parameters by experts’ experience. A lot of
researchers have also demonstrated in their research that the
applications of the hybrid methods can further improve the
prediction or trading performance [59], [60].
In a lot of previous related literature, many scholars
predicted the market price value directly, and RMSE
(Root Mean Square Error) or MAE (Mean Absolute Error)
indicators were adopted to evaluate the accuracy of the
predictors [61]–[64]. However, for market traders, the
accuracy direction prediction and the returns of trading are
considered to be more important than accurately predicting
the value of future prices [65]. Therefore, in this study, the hit
ratio is primarily used to judge the accuracy of direction
prediction. It should be noted that since we have intended
to incorporate a long opening threshold and a short-selling
opening threshold in the trading rule, the transaction would
not be executed by our proposed method at each time.
Instead, the proposed method only opens a position when
the long threshold or short-selling threshold exceeded by
the comprehensive predicted return. Additionally, when the
position open rule is satisfied, the trading simulation would be
carried out, and the comprehensive return rate after a period
of time is calculated to judge the profit-making ability of the
proposed method. Moreover, since many scholars concerned
with the portfolio risk of a trading strategy than just the
trading return, thus, other than direction prediction ability
and profit-taking ability, Sharpe ratio is also employed in
this study to calculate the return/risk ratio for the sake of
evaluating the risk of the proposed method.
The intelligent decision support system proposed in this
study mainly consists of five components: 1) Automated data
download and processing element, in which high-frequency
transaction data with one-minute interval is automatically
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downloaded from the database, and then it is preprocessed (XGBoost), which is considered an improved version of
into 30-minute interval data. 2) Market return forecasting Gradient Boosting Decision Tree (GBDT). It is the out-
element. In this component, the market return after a standing ability of XGBoost, as a computing tool, that
fixed interval will be predicted by a multiple time scale effectively handles sparse data and flexibly executes parallel
forecasting method. 3) Parameter optimization element. and distributed computing [66], which greatly accelerates the
In this component, the parameters of the XGBoost prediction running speed and improves the classification accuracy of
model, the parameters of the trading rules, and the weights the model. In addition, XGBoost provides linear classifiers,
of multiple forecasting results are optimized by PSO using which also has a good performance on linear regression
historical data. 4) Forecasting and simulation trading element. problems [67]. In comparison with GBDT, the primary
The direction prediction and trading simulation of apple improvement of XGBoost is the Taylor expansion of the
futures price movements are performed by this component. loss function during the training process, and the model
5) Performance evaluation element. Three evaluation indi- is optimized by adding regularization terms, which can
cators in this component are adopted to evaluate the exper- efficiently control the model complexity and prevent the
imental results of the proposed method, and a walk-forward problems of overfitting [68].
validation method is employed by us for model training and XGBoost integrates K base learners into strong learners
testing to adapt to the possible rapid changes in market state to approximate the prediction Fk (x) by using an additive
in the apple futures market. function. The process of boosting can be defined as:
A method with high accuracy for apple futures’ price K
movements prediction is very crucial for market participants FK (x) =
X
fk (x) (1)
to make profits. With regards to this, this research focuses
k=1
on the apple futures market in an attempt to improve the
movement direction forecasting and transaction performance. where fk (x) represents an independent weak learner.
In short, this research mainly has three contributions: In XGBoost, by adding a regularization term , the loss
reg
1) According to the perspective of futures market traders function can be developed to the objective function Lk . The
to conduct return forecasting from multiple time scales, formula is expressed as:
a multiple time scale XGBoost based method is proposed in n K
reg
X X
the current research to comprehensively consider forecasting LK (F (xi )) = ψ (yi , FK (xi )) +  (fk ) (2)
results from multiple time scales, and the comprehensive i=1 k=1
predicted return is used for direction forecasting, trading 1
signal generation, and simulation trading; 2) For the apple (f ) = γ T + λ kwk2 (3)
2
futures high-frequency trading, a sophisticated trading rule is
where yi is the real target of the model. 9 represents the
designed, in which the open position conditions, as well as the
loss function, which is employed to evaluate the differences
stop-loss/profit-taking functions, are considered and incorpo-
between yi and FK (xi ) of the i-th sample, and n is the samples
rated. Therefore, the trading rule designed for the proposed
of dataset. In Eq. (3), T denotes the number of leaves, γ is
method has great practical significance; 3) A PSO algorithm
a parameter to control the complexity of the tree structure, ω
is integrated into the proposed approach for optimizing the
denotes the weight of each leaf node, and λ is a regularization
parameters of the algorithm as well as the trading rule, aiming
constant. Additionally, XGBoost adopts the additive manner
to avoid mistakes caused by the parameters that artificially set reg
to optimize the objective function, the loss function 9 of Lk
by traders’ or experts’ experiences.
at step k is transformed as:
The remainder of this paper is arranged as follows.
n
Section 2 introduces the background of methodologies reg
X
applied in this research, including XGBoost and PSO. Lk = ψ (yi , FK −1 (xi ) + fk (xi )) +  (fk ) (4)
Section 3 describes the proposed method in detail, including i=1

the structure of the decision support system, design of trading In more detail, by applying the Taylor second-order
rule, and the procedures of the model training and testing. expansion to the loss function, the target to minimize the
The experimental design, including data description, division objective function becomes faster and more convenient. After
of training and testing datasets, benchmark methods, and removing the constant term, the formulas of the new objective
evaluation criteria, are presented in Section 4. Section 5 function, gi and hi are defined, respectively, as:
reports the experimental results and related discussions. n  
Section 6 summarizes this research and provides several
X 1
Lk ∼
= gi fk (xi ) + hi fk2 (xi ) +  (fk ) (5)
possible research directions for future work. 2
i=1
∂9 (yi , Fk−1 (xi )) ∂ 2 9 (yi , Fk−1 (xi ))
II. METHODOLOGY gi = , hi = (6)
A. EXTREME GRADIENT BOOSTING Fk−1 (xi ) Fk−1 (xi )
In 2016, Chen and Guestrin proposed a new and powerful The equation for estimating the optimal weight scores ωj∗
ensemble learning model called eXtreme gradient boosting and the objective function L∗k at each leaf node j is given

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S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion

by Eq. (7) and (8): particle and swarm acceleration coefficients, r1 and r2 are
P two randomly distributed independent numbers within the
gj
w∗j = − P
i∈Ij
(7) range of (0, 1), and ω denotes an inertia weight, which has an
i∈Ij hj + λ important influence on the convergence of the swarm [69].
P 2
T gi
1X i∈Ij
LK∗ = − + γT (8) III. DECISION SUPPORT SYSTEM
hi + λ
P
2 i∈Ij AND PROPOSED METHOD
j=1
A. STRUCTURE OF THE DECISION SUPPORT SYSTEM
Therefore, the formula of the information gain after
The structure of the proposed decision support system for
splitting can be defined as:
apple futures’ direction prediction and simulation trading is
 !2 !2 
P P  2 shown in Figure 1. It mainly consists of the following five
gi gi
P
 gi  elements:
1 i∈IL i∈IR i∈I

Element 1: Data Download and Processing (DDP)
G= P +P −P  − γ (9)

2 hi + λ hR + λ hi + λ  Element 2: Multiple Time Scale Prediction (MTSP)
 i∈IL i∈Ij i∈I 
Element 3: Parameters Optimization (PO)
Element 4: Prediction and Trading Simulation (PTS)
This splitting algorithm is a so-called greedy search Element 5: Results Evaluation (RE)
algorithm. Assume IR and IL represent the sample sets of the The main procedures of decision support are as follows:
right and left branch, respectively, and I = IR ∪ IL . XGBoost First, The DDP element downloads the 1-min interval apple
can thus branch a leaf node when G reaches maximum. futures prices automatically, and it transforms the original
1-min price data into 30-mins interval ones. Next, in the
B. PARTICLE SWARM OPTIMIZATION MTSP element, the return of each 30-mins is calculated
Particle swarm optimization (PSO) is a well-known as the labels. Then, the five, ten, twenty consecutive
population-based stochastic optimization technology that was periods of historical returns are used as the inputs for the
first introduced by Kennedy and Eberhart. It was originally XGBoost-5, XGBoost-10, and XGBoost-20 based method,
inspired and expended by the researches on the behavior respectively. The outputs of the MTSP element are three
of fish schooling and birds in groups. Starting from the predictions of XGBoost from multiple time scales. In this
concept of experience sharing, PSO searches for the optimal research, we have tested the forecasting ability of the
solution of an objective function by updating the trajectory of proposed model on the basis of ten periods ahead. In the
individual particles randomly generated in the search space. PO element, the parameters of trading rules and XGBoost
In PSO, suppose that there is a population of n particles in are optimized by the PSO algorithm. In the PTS element,
each swarm. The position Xi , which denotes the i-th candidate the trained model along with the optimized trading rule
solution, is defined by Xi = (xi1 , xi2 , . . . , xin ), and the is employed to conduct the direction forecasting task and
velocity Vi is represented by Vi = (vi1 , vi2 , . . . , vin ). Each trading simulations. Lastly, the RE element evaluates the
particle benefits from its historical movement experience experimental results of direction forecasting and simulation
and the historical information of group members, then, trading based on several evaluation criteria, and the detail of
it is attracted to its own optimal location Pbest i and the this aspect is discussed in section 4.3.
current global optimal position Gbest
i in the previous iteration.
Particles in the swarm fly through this search method and B. TRADING RULE DESIGN
dynamically update and adjust their position and velocity. In this research, the forecasting task is to predict the prices
The velocity and position of particles in the search processes of apple futures from multiple time scales using XGBoost
can be defined as follows. regression model. Then, the proposed method executes direc-
 
Vi (t + 1) = ωVi (t) + c1 r1 Pbest (t) − X i (t) tion prediction and simulation trading according to the value
i
  of the comprehensive prediction result and a pre-designed
+ c2 r2 Gi (t) − Xi (t)
best
(10) trading rule. In general, a trading rule is consisted of rules
Xi (t + 1) = Xi (t) + Vi (t + 1) (11) for opening a position and closing that position. In the MTSP
element, three XGBoost based methods are used to predict
where Vi (t) and Xi (t) represent the velocity and the position the return ten periods later. Note that the predicted return is
of i-th particle at the time step t, respectively. The update the comparison of the price ten periods later with the current
of the particle’s velocity at the time step t + 1 depends on price. Figure 2 shows an example of price prediction for ten
three elements: t–th flying velocity, t-th weighted difference periods later by using features from five, ten, and twenty
vectors (Pbest
i − Xi ), and (Gbest
i − Xi ) [54]. Additionally, Pbest
i previous periods of historical data.
is the current local best position of each particle since the first Subsequently, three XGBoost regression method by using
iteration, while Gbest
i is the global optimal position found by features from three different time scales are adopted to
all particles in the previous iteration. c1 and c2 are positive generate a Comprehensive Prediction Value (CPV ), which

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 S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion

FIGURE 1. Structure of the proposed decision support system for apple futures movements’ prediction and trading simulation.

FIGURE 2. An example of price movement prediction for ten-periods later from

multiple time scales of historical data.

is seen as the predicted return for opening a long or a When the predicted return exceeds the Open Long Threshold
short-selling position: (OLT ) or smaller than the Open Short Threshold (OST ),
a long or short-selling position will be opened, respectively.
CPV (t) = w1 P1 (t) + w2 P2 (t) + w3 P3 (t) (12) Otherwise, the proposed method will just wait if the CPV
where P1 , P2 , and P3 denote the predicted returns by the value is between the OLT and OST :
XGBoost based regression methods using features of five, if CPV (t) > OLT

Long,
ten, and twenty periods, respectively; w1 , w2 , and w3 denote Position = Short-selling, if CPV (t) < OST
the weights for P1 , P2 , and P3 , respectively. Note that the No new position, if OST ≤ CPV (t) ≤ OLT

sum of w1 , w2 , and w3 is equal to 1. Then, the trading rule (13)
is implemented with two trading thresholds, and they are
used to compare with the value CPV to determine the trading After executing a long or a short transaction, the position
signals for conducting a long or short-selling transaction. will be held for at most ten periods of 30 minutes.

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S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
TABLE 1. Design of trading rules and conditions for position opening and closing.
However, in order to retain the considerable profits and elim-
inate huge losses for apple futures transactions, profit-taking
and loss-cutting functions related to position closed rules
are also designed in the trading rule. That is, if the floating
return is larger than the profit-taking threshold or the loss
exceeds the loss-cutting threshold within the fixed holding
period, the position that opened would be closed by the
proposed method immediately. The main reason to design the
position-closing function is to control the trading risks and
minimize the probability of suffering a serious loss in one
transaction. The trading rules and related conditions designed
for position opening and closing is shown in Table 1.
C. TRAINING AND TESTING PROCEDURES OF THE
PROPOSED METHOD
The main steps for model training and testing of the proposed
method are as follows:
Step 1: Generate the 30-min interval price data of the apple
futures, and determine the input features of each XGBoost
based method. Divide the whole dataset into training and
testing data.
Step 2: In the model training stage, determine the time
scales of the training dataset period, and three XGBoost
models with different feature inputs are used to predict the
rise and fall amplitude after ten intervals of 30-min data.
Step 3: Assign weights to the three XGBoost forecasting
results, and use a PSO algorithm to optimize the parameters
based on the pre-designed trading rules. The objective
function of the PSO algorithm is the accumulated rate of
return during the training period, which has a length of one
quarter.
Step 4: Generate the optimal parameters of the XGBoost
methods in the training period. The optimal parameters
of trading rules, the weights of three XGBoost prediction
results, and the parameters of XGBoost. Those optimized
parameters are then used for movement direction prediction
and simulation trading in the corresponding testing period.
Step 5: Execute direction predictions and trading simula-
tions in a quarterly testing period. Then, repeat steps 1-4,
complete the direction forecasting and trading simulation for
four quarters (totally one year). Eventually, after a year testing
period is finished, judge the performance and effectiveness of
the proposed method in four quarters and a one-year testing
period.
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IV. EXPERIMENT DESIGN
A. DATA
In this research, 1-min high-frequency historical price data of
the apple futures traded in Zhengzhou Futures Exchange are
derived from the Choice Database [70], which is used for the
training and testing of the proposed method. Then, the 1-min
price data, which included open, close, high, and low prices,
are transformed to the 30-min price data for the experiments.
The entire dataset after transformation starts from January 2,
2018, and ends on May 29, 2020. For the sake of evaluating
the performance of the proposed method in different periods,
the whole dataset is divided into four sub-datasets. Then,
the full dataset is separated into four sub-datasets that are
consisted of training and testing periods. Subsequently, each
testing period covers data of about one quarter.
A walk-forward validation method is used to design the
model throughout the experiment. After one experimental
period is over, there is a three-month shift to execute a
new round of the model training, direction forecasting, and
trading simulation procedures. Details of the data division
are shown in Table 2 and Figure 3. In each sub-dataset,
the training period lasts for 17 months, and the testing period
is 3 months, thus the length ratio of training and testing period
is about 5.7:1.
B. BENCHMARK METHOD
To horizontally evaluate the prediction and simulation trading
performances of the proposed method, several benchmark
methods are also introduced and conducted as one part of
the experiments. The method abbreviations of the proposed
method and related benchmarks, as well as their brief
descriptions, are described in Table 3.
In Table 3, Method 1 called XGBoost-M-PSO is the
proposed method for simulation trading and direction pre-
dictions, and methods 2∼12 belong to benchmark methods.
The proposed method fuses return predictions of multiple
XGBoost based methods from multiple time scales, and it
adopts a PSO to optimize the parameters of the pre-designed
trading rules. Method 2 adopts the same XGBoost based
methods from multiple time scales and the trading rule
design as the proposed method for direction prediction and
simulation trading, while it uses a GA based approach to
optimize the parameters of trading rules. Methods 3 to
5 conduct direction prediction and simulation trading using
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TABLE 2. Details of data division for model training and testing. Note that a walk-forward validation method is employed to divide the dataset
throughout the experiment, the period of training dataset spans from 2018/Jan to 2020/Feb, and the number of samples in this training period is 3884.

FIGURE 3. A walk-forward validation method for data division of training periods and testing periods.

TABLE 3. Benchmark methods for results comparison.

five, ten, and twenty periods time scale of features, respec-
tively. Particularly, five, ten, and twenty are a relatively short,
a moderate, and a relatively long time scale respectively,
compared with the time scale of ten periods ahead prediction.
Method 6 applies a simple average combination strategy of
the three XGBoost models to determine the prediction of
movement direction and the signal of simulation trading.
That is, if the simple average value of three predicted
returns is larger than zero, a ‘‘rise’’ prediction is provided,
and then, a long transaction is executed. Otherwise, this
benchmark method performs a ‘‘fall’’ prediction, and a
short-selling transaction will be executed if the simple
average value is smaller than zero. Compared with method 6,
the proposed method adopts a weighted average method and
designs position-closing thresholds to enhance the direction
prediction accuracy and to improve the profit-making ability.
Method 7 would open a long/short position only if all
the returns predicted by those three XGBoost models are
larger/smaller than zero. Methods 8 to 10 apply an SVM,
an ANN, and a RF based method for predicting movement
direction and executing the trading simulation, and the
input variables for methods 8 to 10 are previous twenty
periods of returns. It should be noted that methods 3 to
10 perform direction forecasting and trading simulation every
time if there is no position held, while the proposed method
(method 1) and method 2 open a position only if the value of

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S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
the return is predicted to be larger than the OLT, or less than
the OST. Methods 11 and 12 are well-known benchmarks for
strategy comparison in stock and futures markets. Those two
passive trading strategies are adopted to compare with the
profitability of the proposed method.
C. EVALUATION CRITERIA
For measuring the experimental results, three ratios, includ-
ing hit ratio, accumulated return, and Sharpe ratio, are
selected to measure the forecasting accuracy of price
movement direction, profit-making ability, and return-risk
ratio performance, respectively.
Hit ratio (HR), as a commonly used evaluation indicator,
is applied to identify the forecasting rate of the correct times
for apple futures direction prediction. Suppose that T is the
total times of direction predictions during the testing period,
in which the number of correct ‘‘rise’’ predictions and correct
‘‘fall’’ predictions are respectively CR times and CF times.
Since the proposed method is designed with two trading
thresholds in the trading rule, our decision support system
would not perform a simulation trading every time. Hence,
the formula of hit ratio can be calculated in the following
Eq. (14):
CR + CF
HR = (14)
T
Besides producing higher direction forecasting accuracy,
return performance is also very crucial for investors to
evaluate a trading system or a trading strategy. After the
direction prediction is conducted, suppose that a method
predicts the apple futures’ price to go up and the forecasting
return exceeds the long threshold OLT, a ‘‘long’’ signal is
provided, and a long position is opened in the apple futures
market. Similarly, If a predictor forecasts that the price of
apple futures will go down and the forecasting return is
less than the short-selling threshold OST, a ‘‘short-selling’’
signal is given, and a short-selling transaction is executed.
The normal holding period for the trading position is ten
periods if the condition of profit-taking or loss-cutting is not
satisfied during the normal holding period, which is set to be
ten periods. After one quarter testing period, the accumulated
return (AR) can be calculated by:
m
X which is smaller than that of XGBoost-10 and XGBoost-
AR = (Rt − C)
t=1
where AR denotes the accumulated return in a testing period
with about one season length, Rt is the return for one
transaction, m denotes the number of transactions in that
testing period. Additionally, C represents the transaction cost,
which is also considered in the trading simulation, and it is set
to be 0.1% for each transaction. Note that the trading leverage
is set to be three for both the proposed method and other
benchmarks.
Moreover, in addition to the direction prediction accuracy
and profitability, traders and scholars considered that the trad-
ing risk generally could play an essential role in evaluating the
VOLUME 9, 2021
performance of the investment portfolio. The risk-adjusted
return, which can take both risks and benefits into account,
is considered an effective comprehensive indicator. The
application of this index contributes to eliminating the
negative effects of risk factors on performance measurement.
Among the related indicators, Sharpe ratio (SR) is one of the
well-known classic indicators that can comprehensively be
considered both for benefits and risks generated in a trading
strategy, named after William F. Sharpe [71]. The Sharpe
ratio is employed to measure the excess return produced by
each unit of deviation in a trading strategy or an investment
portfolio, which can be regarded as a way to examine the
investment performance by adjusting for its risk. After a total
of four trading quarters, the Sharpe ratio is calculated as
follows:
E AR − R0
 
SR = (16)
σ
in which AR is the asset return, R0 is the risk-free rate,
E[AR − R0 ] represents the expected value of the asset return
over the benchmark return and σ denotes the standard
deviation of the asset excess return.
V. EXPERIMENTAL RESULTS
A. HIT RATIO RESULTS
The methods XGBoost-M-GA, XGBoost-5, XGBoost-10,
XGBoost-20, XGBoost-Ave, XGBoost-All, ANN, SVM, and
RF are selected as benchmark methods to investigate the
improvement of the proposed method on direction forecasting
and profitability. Hit ratio results of the proposed method and
benchmarks for apple futures’ price direction forecasting on
four testing periods (Q1-Q4) are reported in Table 4.
A greater result of hit ratio generally demonstrates superior
accuracy for price direction prediction. First, we focus on
the results of three individual XGBoost based methods:
XGBoost-5, XGBoost-10, and XGBoost-20. It is found that
XGBoost-10 produced the best average hit ratio in four
quarters of the testing period, which is better than that of
XGBoost-5 and XGBoost-20. It indicates that a relatively
long or a short time scale of historical features would cause
a decrease in the average accuracy for direction forecasting.
XGBoost-Ave yielded an average hit ratio of about 50.17%,
(15) 20, indicating that just using a simple average could not
improve the direction prediction accuracy. XGBoost-All
produced an average hit ratio of about 54.11%, which is
larger than all the three individual XGBoost based methods.
It demonstrates that the average direction prediction accuracy
was improved by using the trading signals that all three
XGBoost models agreed with each other. Furthermore, it is
observed that the predictors based on ANN, SVM, and RF
yielded average hit ratio results of 44.16%, 49.60%, and
49.04%, respectively. All of those hit ratio results are smaller
than that of XGBoost-20, demonstrating that XGBoost based
method is superior to SVM, ANN, and RF based methods
for direction prediction in 30-min apple futures during the
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 S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
TABLE 4. Hit ratio results of the proposed method and benchmark methods.
testing periods, which is consistent with the conclusions
that XGBoost outperformed other classic machine learning
methods such as SVM, ANN, and RF [68], [72], [73], in terms
of prediction accuracy. Additionally, all those three machine
learning methods produced average hit ratio results smaller
than 50%, which is the hit ratio value of random selection.
It illustrates that SVM, ANN, and RF based methods are
relatively difficult to predict the movement direction of
high-frequency apple futures prices.
Lastly, we focus on the hit ratio results of the experi-
mental methods. Among all the methods, it is clear that
the hit ratio results of XGBoost-M-GA and the proposed
XGBoost-M-PSO method were extremely better than that
of other benchmark methods. We observed that although
the XGBoost-M-GA method performed better than other
benchmarks except for the testing period Q4, the average
hit ratio result of our proposed method was still superior
to XGBoost-M-GA. It suggests that compared with the
GA based method, the accuracy of direction prediction
was successfully improved due to the application of the
PSO algorithm. The proposed method produced hit ratio
values 75%, 63.33%, 92.86%, and 68.42% for testing periods
Q1-Q4, respectively, which was always the best hit ratio
result in each sub-testing period. Additionally, the proposed
method finally generated a hit ratio value which reached
74.90%. It indicates that by using the design of return
predictions fusion from multiple time scales, employing two
trading thresholds to filter out uncertain signals, and applying
the PSO based approach, the proposed method successfully
improved the forecasting accuracy of movement direction for
high-frequency apple futures price.
B. RETURNS OF TRADING SIMULATION
For futures market participants, the profit-making ability
is generally considered to be more crucial than movement
direction forecasting to evaluate a decision support system.
Table 5 shows the trading returns of the proposed method and
benchmarks in four quarters, as well as their average and sum
for the entire one-year testing period. Note that in addition
to the benchmark methods tested for direction prediction,
two well-known passive trading strategies, LAH and SAH,
are also adopted for trading return in comparison with the
proposed method. The value of the trading return is measured
relative to the initial investment.
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From Table 5, it is found that the XGBoost based
benchmark methods XGBoost-5, XGBoost-10, XGBoost-20,
XGBoost-Ave, XGBoost-All, and XGBoost-M-GA yielded
average returns of −0.16%, −0.76%, −1.35%, −0.64%,
−0.69%, and 3.01% respectively. However, the return results
in all four quarters generated by XGBoost-M-GA were
smaller than our proposed method, as well as the average
return result. Therefore, except for XGBoost-M-GA method,
none of the XGBoost based methods is capable of producing
a positive average return. Additionally, XGBoost-Ave and
XGBoost-All, which are the methods combining the predic-
tion results from three time scales, both produced negative
trading returns in half of their testing periods (XGBoost-Ave
was in Q1 and Q2, while XGBoost-All was in Q1 and Q4).
The negative average returns produced by XGBoost-Ave
(−0.64%) and XGBoost-All (−0.69%) demonstrate that
merely using a simple average strategy of the three XGBoost
predictors or an ‘‘all predictors satisfaction’’ strategy failed
to improve the trading performance for investors.
In addition, experimental results of three popular machine
learning algorithms SVM, ANN, and RF are compared. It is
observed that all of those three well-known and well-applied
algorithms almost suffered from losses of the four quarters,
which causes huge negative returns for the entire one-year
testing period. Furthermore, we focus on the two passive
trading strategies LAH and SAH. It is found by us that
although they could yield outstanding profits in several
testing periods, such as LAH yielded a profit up to 27.34%
in Q4, and SAH produced a 13.40% positive return in the
testing period Q3. However, they suffered from great losses
in other quarters, such as LAH suffered from serious losses
of more than −10% in testing periods Q2 and Q3, and SAH
produced a negative return of −27.54% in testing period Q4.
It reveals the non-stability of their profit-making ability in the
apple futures market.
Although the proposed method was incapable of producing
the greatest return results in any quarter of the four sub-testing
periods, it continuously kept gaining profits in all quarters.
In comparison with other benchmarks, the proposed method
XGBoost-M-PSO produced the largest average return in
four quarters of the testing periods, thus making it yield a
positive accumulated return of total 15.79% in the one-year
testing period. XGBoost-M-PSO performed extremely better
than XGBoost-Ave, although both considered and combined
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S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
TABLE 5. Trading returns of the proposed method and benchmark methods.
FIGURE 4. Net values of the proposed method and benchmark methods in four testing periods.
the predictions from multiple time scale XGBoost based
methods. It is possibly because several uncertain market
signals could not contribute to making large profits, such as
small price fluctuations during market transactions, whereas
they increased the overall trading costs accumulated by a
large number of transactions. In addition, among the meth-
ods, the proposed method XGBoost-M-PSO outperformed
XGBoost-M-PSO and consistently yielded stable positive
returns in all four quarters, demonstrating that it could be
applied as a reliable decision support system for trading in
the apple futures market. The net values of the proposed
method and benchmarks in four testing periods are shown
in Figure 4, from which it could be clearly found that the
proposed method always generated the best return in four
testing quarters.
Additionally, Figure 5 shows the accumulated return
results of the proposed method and other benchmarks for
the entire testing period, which ranges from May 2019 to
April 2020, to show how the accumulated returns were
produced. The left vertical axis represents the value of the
VOLUME 9, 2021
accumulated return (for instance, a value of 0.05 denotes
a 5% return). Note that the accumulated returns of the
benchmarks LAH and SAH are not shown in Figure 5, since
the plot of the sharp fluctuations of the apple futures’ prices
makes the return comparison of the proposed method and
other benchmarks not distinct. As can be seen from Figure 5,
the XGBoost-Ave and XGBoost-20 produced relatively good
accumulated returns among the benchmark methods from
May to October of 2019, whereas they encountered several
serious retracements from November 2019 to the end of
the one-year testing period. On the contrary, from results
depicted in Figure 5, we observed that the retracements
were not obvious within the entire one-year testing period
for XGBoost-M-GA and the proposed XGBoost-M-PSO
method. In spite of the fact that the XGBoost-M-GA method
generated an annual accumulated return result of 12.02%,
the proposed method finally generated larger accumulated
returns than all other benchmark methods during the one-year
testing period, and the production process of gains was
more steady, with a small entrancement only occurred from
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 S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
FIGURE 5. Accumulated return of the proposed method and benchmark methods in the one-year testing period.
TABLE 6. Sharpe ratio results of the proposed method and benchmark methods. ER is the excess returns, SD represents the standard deviation of the
excess returns, and SR denotes the Sharpe ratio value.
November to December of the year 2019. It suggests that
the proposed method produced profits more stable than
other benchmarks. In particular, nearly all methods suffered
from huge losses from January to March of the year 2020,
eventually making them produced negative returns in the
one-year testing period. In contrast, the proposed method
XGBoost-M-PSO yielded positive returns in Q3 and Q4
continuously, eventually produced an annual yield of up to
15.79% in the one-year testing period. The proposed method
not only outperformed benchmark methods at profitability
but also its way of yield accumulation was much more
stable. The outstanding performance of the proposed method
illustrates that it could be applied as an efficient decision
support system for participants in the apple futures market.
Moreover, from the trading performances of LAH and SAH
in the apple futures market, LAH and SAH yielded about
−6.14% and 5.34% accumulative return in the one-year
testing period. On the whole, the overall gains or losses of
LAH and SAH were not very large. It demonstrates that the
outstanding profit yielded by the proposed XGBoost-M-PSO
method is not because of the unilateral rise or fall of the apple
futures market.
C. SHARPE RATIO RESULTS
The Sharpe ratio value is calculated using the risk-free
interest rate, which is generally chosen as the one-year
Treasury bond yield. Since our trading target is apple futures
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traded in Zhengzhou Futures Exchange, the risk-free interest
rate used in calculating Sharpe ratio in this research is
from the Chinese bond information website [74]. The testing
dataset in the experiment spans from June 2019 to May 2020,
and the length of the four sub-testing periods is designed
as three months. Therefore, a quarter of the average of the
one-year Treasury bond interest rate during the testing period,
which is approximately 0.61%, is employed as the risk-free
interest rate to calculate the excess return and the Sharpe ratio
results.
It should be noted that the larger the Sharpe ratio value,
the better the return/risk ratio performance. A larger Sharpe
ratio value generally reflects a higher return and lower volatil-
ity of a trading strategy or a trading method. The Sharpe ratio
values (SR), excess return (ER), and standard deviation (SD)
for the proposed XGBoost-M-PSO method and bench-
marks are reported in Table 6. During the entire one-year
experimental trading period from June 2019 to May 2020,
the proposed method XGBoost-M-PSO achieved the largest
Sharpe ratio value of 4.3377, which was extremely better
than that of the benchmark methods. Except for the proposed
method, the method that produced a positive Sharpe ratio
is XGBoost-M-GA (2.0689) and SAH (0.0371). However,
the benchmark methods using XGBoost based models, which
are XGBoost-5, XGBoost-10, XGBoost-20, XGBoost-Ave,
and XGBoost-All, yielded Sharpe ratio values of −0.6754,
−0.6618, −0.7050, −0.4125, and −0.6771, respectively.
VOLUME 9, 2021
S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
Therefore, it can be concluded that the implements of
multiple time scale predictions fusion, long and short-selling
thresholds in trading rule, as well as adopting parameters opti-
mization for the proposed method successfully enhanced the
trading return as well as lowering the return’s volatility. The
outstanding trading performance reveals that the proposed
method is of great reference to market traders engaged in
high-frequency trading of apple futures.
VI. CONCLUSION
In this research, an intelligent decision support system
based on a multiple time scale XGBoost was developed for
movement direction forecasting and simulation trading in the
apple futures market. The experimental results indicated that
the proposed method produced a result of the average hit
ratio of about 74.90% and an annual accumulated return of
15.79% for apple futures’ high-frequency trading during a
one-year testing period. Additionally, the proposed method
also generated the largest Sharpe ratio value of 4.3377,
which demonstrated that the proposed method not only
performed best at the prediction accuracy of apple futures’
price movement direction and the ability to make gains but
also excelled at the return-risk ratio. Therefore, the proposed
method could be applied as an efficient decision support
system for market participants trading on Chinese apple
futures. Moreover, the trading rule’s parameter optimization
is not only useful for filtering out the uncertain trading signals
but also beneficial for finding out parameters of the trading
rule for market traders, which is an important reference for
them to make decisions on high-frequency trading in the
apple futures market.
There are several further directions that could be expanded
based on current research. For instance, this research has
adopted the time scale of the five, ten, and twenty periods.
However, to further improve the direction prediction accuracy
and trading profits presented in this paper, other researchers
could conduct experiments to consider predictions from
XGBoost using futures of other time scales such as fifteen
or thirty. Furthermore, this research also could be expanded
to high-frequency trading in other futures markets [75]–[77]
such as S&P 500 index futures.
ACKNOWLEDGMENT
The authors would like to thank the anonymous reviewers for
their comments and discussions.
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S. Deng et al.: Decision Support System for Trading in Apple Futures Market Using Predictions Fusion
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SHANGKUN DENG received the D.Sc. degree
in open and environmental systems from Keio
University, Yokohama, Japan, in 2015.
He worked with Hitachi Corporation from
2015 to 2016. He is currently a Lecturer with the
College of Economics and Management, China
Three Gorges University, Yichang, China. His
research interests include forecasting in financial
market, machine learning, and market regulation.
XIAORU HUANG received the B.S. degree in
information management and information system
from the Xi’an University of Finance and Eco-
nomics (XUFE), Xi’an, China, in 2018. She is
currently pursuing the master’s degree in applied
economics with China Three Gorges University
(CTGU), Yichang, China.
Her research interests include price fluctuations
and forecasts in financial markets.
JIAHUI WANG is currently pursuing the bach-
elor’s degree with the College of Economics
and Management, China Three Gorges University
(CTGU), Yichang, China.
Her research interests include price prediction
in future markets and machine learning.
VOLUME 9, 2021
ZHAOHUI QIN received the Ph.D. degree in
ethnic economics from the Minzu University of
China, Beijing, in 2011.
He is currently a Researcher with the College of
Economics and Management, China Three Gorges
University, Yichang, China. His research interest
includes agriculture product analysis.
ZHE FU is currently pursuing the master’s degree
with the School of History, Beijing Normal
University, Beijing, China.
Her research interests include the economy, his-
tory of economics, and the history of agriculture.
AIMING WANG is currently pursuing the
master’s degree in applied economics with China
Three Gorges University (CTGU), Yichang,
China.
Her research interest includes agriculture
products analysis.
TIANXIANG YANG was born in Wenzhou, China,
in October 1988. He received the M.E. degree
in global information and telecommunication
studies from Waseda University, Tokyo, Japan,
in 2015. He is currently a Student of the Doc-
toral Program and a Research Associate with
the Department of Industrial and Management
Systems Engineering, Waseda University. His
research interest includes purchase history data
analysis based on machine learning algorithms.
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