A multi-layer machine learning approach for cryptocurrency trading utilizing technical indicators and sentiment index

Purpose This study aims to enhance cryptocurrency price and trend prediction by applying advanced machine learning (ML) techniques. Given the market’s high volatility and complexity, the research identifies effective models for different conditions, providing insights for investors and risk management. Design/methodology/approach This study proposes a six-stage framework for cryptocurrency price prediction, integrating advanced ML techniques. Data from ten cryptocurrencies are processed, extracting 37 key features, including return, the Fear and Greed Index and various technical indicators. The model employs Deep Q-Networks (DQN), Long Short-Term Memory (LSTM) and multiple regression methods such as linear regression, support vector regression, ridge, LASSO, decision tree, Random Forest, multi-layer perceptron, stochastic gradient descent, elastic net and Bayesian regression. Model performance is evaluated using trading strategies and metrics like accuracy, sensitivity, recall, MSE, MAE and F1-score. Findings The results indicate that complex models like DQN and LSTM excel in volatile markets due to their ability to capture intricate price patterns, whereas simpler models such as linear regression and ridge regression perform better in stable conditions. The multi-layered parallel design enhances computational efficiency, enabling independent asset evaluation. These findings highlight the potential of artificial intelligence in improving prediction accuracy and supporting informed investment decisions. Originality/value This research introduces a novel six-stage ML framework incorporating diverse predictive models and key features for cryptocurrency forecasting. The multi-layered parallel approach enhances computational efficiency, setting this study apart from existing research. The comparative analysis of models offers valuable guidance for investors, traders and financial analysts navigating volatile cryptocurrency markets.