Signal Strategy

Overview

The signal-based strategy module provides components for trading based on prediction signals from machine learning models or other signal generators. It includes:

Signal types with direction, strength, and confidence
Configurable confidence thresholds
Position sizing based on signal strength
Risk management with position limits

Signal

Represents a trading signal with direction, strength, and confidence.

pub struct Signal {
    pub direction: i8,        // -1 (sell), 0 (neutral), +1 (buy)
    pub strength: f32,        // Signal strength (0 to 1)
    pub confidence: f32,      // Confidence from model (0 to 1)
    pub timestamp: Timestamp, // Signal timestamp
}

Signal Fields

direction

The trading direction suggested by the signal:

+1: Buy signal (expect price to increase)
-1: Sell signal (expect price to decrease)
0: Neutral signal (no clear direction)

strength

Magnitude of the signal, ranging from 0.0 to 1.0. Higher values indicate stronger signals. Usage:

Can be used for position sizing
Filters out weak signals
Typically derived from model prediction magnitude

confidence

Model confidence in the prediction, ranging from 0.0 to 1.0. Higher values indicate more reliable signals. Usage:

Primary filter for signal quality
Compared against min_confidence threshold
Can represent model uncertainty or ensemble agreement

timestamp

When the signal was generated, used for tracking signal freshness.

Signal Constructors

buy

pub fn buy(strength: f32, confidence: f32, timestamp: Timestamp) -> Self

Creates a buy signal. Example:

use nano_strategy::signals::Signal;
use nano_core::types::Timestamp;

let signal = Signal::buy(
    0.75,  // 75% strength
    0.82,  // 82% confidence
    Timestamp::now(),
);

assert!(signal.is_buy());
assert_eq!(signal.direction, 1);

sell

pub fn sell(strength: f32, confidence: f32, timestamp: Timestamp) -> Self

Creates a sell signal. Example:

let signal = Signal::sell(
    0.68,  // 68% strength
    0.79,  // 79% confidence
    Timestamp::now(),
);

assert!(signal.is_sell());
assert_eq!(signal.direction, -1);

neutral

pub fn neutral(timestamp: Timestamp) -> Self

Creates a neutral signal indicating no trading action. Example:

let signal = Signal::neutral(Timestamp::now());
assert!(signal.is_neutral());
assert_eq!(signal.direction, 0);

Signal Methods

is_buy

pub fn is_buy(&self) -> bool

Returns true if the signal direction is positive (buy).

is_sell

pub fn is_sell(&self) -> bool

Returns true if the signal direction is negative (sell).

is_neutral

pub fn is_neutral(&self) -> bool

Returns true if the signal direction is zero (neutral).

side

pub fn side(&self) -> Option<Side>

Converts signal direction to an order side. Returns:

Some(Side::Buy) for buy signals
Some(Side::Sell) for sell signals
None for neutral signals

file:///home/daytona/workspace/source/crates/nano-strategy/src/signals.rs:104-111

SignalConfig

Configuration for signal-based trading strategies.

pub struct SignalConfig {
    pub min_confidence: f32,      // Minimum confidence threshold
    pub min_magnitude: f32,       // Minimum prediction magnitude
    pub confidence_scaling: bool, // Position sizing based on confidence
    pub max_position_size: f32,   // Maximum position size (as fraction)
    pub target_ticks: i64,        // Target profit in ticks
    pub stop_ticks: i64,          // Stop loss in ticks
}

Configuration Parameters

min_confidence

Minimum confidence threshold for acting on signals. Signals below this threshold are ignored. Default: 0.55 (55%) Example:

let config = SignalConfig {
    min_confidence: 0.65, // Only trade signals with 65%+ confidence
    ..Default::default()
};

min_magnitude

Minimum prediction magnitude required. Can filter out weak predictions. Default: 0.001 Note: Currently not actively used in the base implementation but available for custom strategies.

confidence_scaling

Whether to scale position size based on signal strength. Default: true Behavior:

true: Order size = base_size * signal.strength
false: Order size = base_size (constant)

Example:

// With confidence_scaling = true, base_size = 10:
// Signal strength 0.5 → Order size = 5
// Signal strength 1.0 → Order size = 10

max_position_size

Maximum position size as a fraction. Currently defined but not actively enforced in base implementation. Default: 1.0

target_ticks

Target profit level in ticks for take-profit orders. Default: 10 Note: Available for use in custom strategies or profit-taking logic.

stop_ticks

Stop loss level in ticks for risk management. Default: 5 Note: Available for use in custom strategies or stop-loss logic.

Default Configuration

impl Default for SignalConfig {
    fn default() -> Self {
        Self {
            min_confidence: 0.55,
            min_magnitude: 0.001,
            confidence_scaling: true,
            max_position_size: 1.0,
            target_ticks: 10,
            stop_ticks: 5,
        }
    }
}

SignalStrategy

A strategy that trades based on external signals.

pub struct SignalStrategy {
    base: BaseStrategy,
    config: SignalConfig,
    instrument_id: u32,
    order_size: u32,
    max_position: i64,
    pending_order: Option<OrderId>,
    last_signal: Option<Signal>,
    next_order_id: u64,
}

Constructor

new

pub fn new(
    name: &str,
    instrument_id: u32,
    signal_config: SignalConfig,
    order_size: u32,
    max_position: i64,
    tick_value: f64,
) -> Self

Creates a new signal-based strategy. Parameters:

name: Strategy identifier
instrument_id: ID of the instrument to trade
signal_config: Signal configuration
order_size: Base order size in contracts
max_position: Maximum absolute position allowed
tick_value: Value of one tick for P&L calculation

Example:

use nano_strategy::signals::{SignalStrategy, SignalConfig};

let config = SignalConfig {
    min_confidence: 0.60,
    confidence_scaling: true,
    target_ticks: 15,
    stop_ticks: 7,
    ..Default::default()
};

let mut strategy = SignalStrategy::new(
    "ML_Signal",
    101,      // instrument_id
    config,
    20,       // base order size
    100,      // max position
    12.5,     // tick value
);

Core Methods

process_signal

pub fn process_signal(
    &mut self,
    signal: &Signal,
    book: &dyn OrderBook,
) -> Vec<Order>

Processes a trading signal and generates orders if appropriate. file:///home/daytona/workspace/source/crates/nano-strategy/src/signals.rs:158-215 Logic:

Skip if pending order exists
Check signal confidence against threshold
Determine order side from signal direction
Calculate order size (respecting position limits)
Generate IOC (Immediate-Or-Cancel) order
Record as pending order

Example:

use nano_strategy::signals::{SignalStrategy, SignalConfig, Signal};
use nano_core::types::Timestamp;

let config = SignalConfig::default();
let mut strategy = SignalStrategy::new(
    "test",
    1,
    config,
    10,
    100,
    12.5,
);

// Process a buy signal
let signal = Signal::buy(0.8, 0.75, Timestamp::now());
let orders = strategy.process_signal(&signal, &order_book);

for order in orders {
    exchange.submit_order(order);
}

calculate_order_size

fn calculate_order_size(&self, signal: &Signal, current_pos: i64) -> u32

Calculates appropriate order size based on signal strength and position limits. file:///home/daytona/workspace/source/crates/nano-strategy/src/signals.rs:218-234 Algorithm:

Apply confidence scaling if enabled:
```
size = base_size * signal.strength
```
Calculate remaining capacity:
- For buy: max_position - current_position
- For sell: max_position + current_position
Return minimum of calculated size and remaining capacity

Example:

// Config: order_size = 20, confidence_scaling = true
// Position: +30, Max: 100
// Signal: buy, strength = 0.6

// Calculated size = 20 * 0.6 = 12
// Max buy capacity = 100 - 30 = 70
// Final order size = min(12, 70) = 12

last_signal

pub fn last_signal(&self) -> Option<&Signal>

Returns a reference to the most recently processed signal. Example:

if let Some(signal) = strategy.last_signal() {
    println!("Last signal: direction={}, confidence={:.2}",
             signal.direction, signal.confidence);
}

Strategy Implementation

The SignalStrategy implements the Strategy trait:

on_market_data

file:///home/daytona/workspace/source/crates/nano-strategy/src/signals.rs:248-251 Updates base strategy but doesn’t generate orders. Signals must be provided externally via process_signal().

on_fill

file:///home/daytona/workspace/source/crates/nano-strategy/src/signals.rs:253-259 Handles fill events:

Updates position and P&L via base strategy
Clears pending order if the fill matches

on_order_reject / on_order_cancel

file:///home/daytona/workspace/source/crates/nano-strategy/src/signals.rs:263-273 Clears pending order tracking when orders are rejected or cancelled.

Usage Patterns

Integration with ML Models

use nano_strategy::signals::{SignalStrategy, SignalConfig, Signal};
use nano_core::types::Timestamp;

// Initialize strategy
let config = SignalConfig {
    min_confidence: 0.70,  // High confidence threshold
    confidence_scaling: true,
    ..Default::default()
};

let mut strategy = SignalStrategy::new(
    "LSTM_ES",
    101,
    config,
    15,
    200,
    12.5,
);

// In your main trading loop:
loop {
    // Get prediction from ML model
    let prediction = ml_model.predict(&features);
    
    // Convert to signal
    let signal = if prediction.value > 0.0 {
        Signal::buy(
            prediction.value.abs() as f32,
            prediction.confidence as f32,
            Timestamp::now(),
        )
    } else if prediction.value < 0.0 {
        Signal::sell(
            prediction.value.abs() as f32,
            prediction.confidence as f32,
            Timestamp::now(),
        )
    } else {
        Signal::neutral(Timestamp::now())
    };
    
    // Process signal
    let orders = strategy.process_signal(&signal, &order_book);
    
    // Submit orders to exchange
    for order in orders {
        exchange.submit_order(order);
    }
    
    // Monitor performance
    println!("Position: {}, P&L: ${:.2}",
             strategy.position(), strategy.pnl());
}

Multiple Signal Sources

// Ensemble of signal strategies
let mut strategies = vec![
    SignalStrategy::new("Model_A", 101, config.clone(), 10, 50, 12.5),
    SignalStrategy::new("Model_B", 101, config.clone(), 10, 50, 12.5),
    SignalStrategy::new("Model_C", 101, config.clone(), 10, 50, 12.5),
];

// Generate signals from each model
let signals = vec![
    model_a.predict(&features),
    model_b.predict(&features),
    model_c.predict(&features),
];

// Process each signal independently
for (strategy, signal) in strategies.iter_mut().zip(signals.iter()) {
    let orders = strategy.process_signal(signal, &order_book);
    // Submit orders...
}

// Aggregate P&L across strategies
let total_pnl: f64 = strategies.iter().map(|s| s.pnl()).sum();

Risk Management

let config = SignalConfig {
    min_confidence: 0.65,     // Require strong signals
    confidence_scaling: true, // Scale size with confidence
    target_ticks: 20,         // Take profit at 20 ticks
    stop_ticks: 10,           // Stop loss at 10 ticks
    ..Default::default()
};

let mut strategy = SignalStrategy::new(
    "Risk_Managed",
    101,
    config,
    10,      // Conservative size
    50,      // Tight position limit
    12.5,
);

// Monitor risk in trading loop
if strategy.position().abs() > 40 {
    println!("WARNING: Approaching position limit");
}

if strategy.pnl() < -500.0 {
    println!("WARNING: Drawdown threshold reached");
    // Implement emergency stop logic
}

Signal Interpretation

Confidence vs Strength

Confidence:

How certain is the model about its prediction?
Used as a gate: signals below min_confidence are rejected
Represents model reliability or uncertainty

Strength:

How strong is the predicted move?
Used for position sizing when confidence_scaling = true
Represents magnitude of expected price movement

Example:

// High confidence, moderate strength
let signal = Signal::buy(
    0.60,  // Moderate expected move
    0.85,  // Very confident
    Timestamp::now(),
);
// Result: Trade will be taken, moderate position size

// Moderate confidence, high strength
let signal = Signal::buy(
    0.95,  // Strong expected move
    0.58,  // Low confidence
    Timestamp::now(),
);
// Result: May not trade if min_confidence > 0.58

Direction Values

Direction	Meaning	Use Case
+1	Buy	Expect price increase
0	Neutral	Uncertain or no clear signal
-1	Sell	Expect price decrease

Complete Example

use nano_strategy::signals::{SignalStrategy, SignalConfig, Signal};
use nano_strategy::StrategyState;
use nano_core::traits::Strategy;
use nano_core::types::Timestamp;

fn main() {
    // Configure signal-based strategy
    let config = SignalConfig {
        min_confidence: 0.60,
        min_magnitude: 0.01,
        confidence_scaling: true,
        max_position_size: 1.0,
        target_ticks: 15,
        stop_ticks: 8,
    };
    
    let mut strategy = SignalStrategy::new(
        "ES_Predictor",
        101,         // ES futures
        config,
        20,          // 20 contracts base size
        100,         // Max 100 contracts
        12.5,        // $12.50 per tick
    );
    
    // Activate strategy
    strategy.base.set_state(StrategyState::Trading);
    
    // Simulate receiving signals
    let signals = vec![
        Signal::buy(0.75, 0.82, Timestamp::now()),
        Signal::neutral(Timestamp::now()),
        Signal::sell(0.65, 0.73, Timestamp::now()),
    ];
    
    for signal in signals {
        println!("Processing signal: dir={}, str={:.2}, conf={:.2}",
                 signal.direction, signal.strength, signal.confidence);
        
        let orders = strategy.process_signal(&signal, &order_book);
        
        if !orders.is_empty() {
            println!("Generated {} orders", orders.len());
            // Submit to exchange...
        } else {
            println!("No orders generated");
        }
    }
    
    // Check performance
    println!("Final position: {}", strategy.position());
    println!("Total P&L: ${:.2}", strategy.pnl());
}

Core

Strategy

Backtest

Order Book

Configuration

​Overview

​Signal

​Signal Fields

​direction

​strength

​confidence

​timestamp

​Signal Constructors

​buy

​sell

​neutral

​Signal Methods

​is_buy

​is_sell

​is_neutral

​side

​SignalConfig

​Configuration Parameters

​min_confidence

​min_magnitude

​confidence_scaling

​max_position_size

​target_ticks

​stop_ticks

​Default Configuration

​SignalStrategy

​Constructor

​new

​Core Methods

​process_signal

​calculate_order_size

​last_signal

​Strategy Implementation

​on_market_data

​on_fill

​on_order_reject / on_order_cancel

​Usage Patterns

​Integration with ML Models

​Multiple Signal Sources

​Risk Management

​Signal Interpretation

​Confidence vs Strength

​Direction Values

​Complete Example

​See Also

Overview

Signal

Signal Fields

direction

strength

confidence

timestamp

Signal Constructors

buy

sell

neutral

Signal Methods

is_buy

is_sell

is_neutral

side

SignalConfig

Configuration Parameters

min_confidence

min_magnitude

confidence_scaling

max_position_size

target_ticks

stop_ticks

Default Configuration

SignalStrategy

Constructor

new

Core Methods

process_signal

calculate_order_size

last_signal

Strategy Implementation

on_market_data

on_fill

on_order_reject / on_order_cancel

Usage Patterns

Integration with ML Models

Multiple Signal Sources

Risk Management

Signal Interpretation

Confidence vs Strength

Direction Values

Complete Example

See Also