Labelling Techniques in Trading: Triple-Barrier and Meta-Labelling
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The idea behind the triple-barrier method is that we have three barriers: an upper barrier, a lower barrier, and a vertical barrier. The upper barrier represents the threshold an observation’s return needs to reach in order to be considered a buying opportunity (a label of 1), and the lower barrier represents the threshold an observation’s return needs to reach in order to be considered a selling opportunity (a label of -1), and the vertical barrier represents the amount of time an observation has to reach its given return in either direction before it is given a label of 0.
