Hands-On Machine Learning for Algorithmic Trading

The logistic function

To prevent the model from producing values outside the [0, 1] interval, we must model p(x) using a function that only gives outputs between 0 and 1 over the entire domain of x. The logistic function meets this requirement and always produces an S-shaped curve (see notebook examples), and so, regardless of the value of X, we will obtain a sensible prediction:

Here, the vector x includes a 1 for the intercept captured by the first component of , . We can transform this expression to isolate the part that looks like a linear ...