# Trading Strategy Optimization via Textual Gradient

arXiv: https://arxiv.org/abs/2610.03128 · HTML: https://mlsanity.com/paper/2610.03128/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 14 of its 38 references that are in the map.
- First posted on arXiv 2 Oct 2026.

## Builds on (most cited first, 14 of 14)

- [AlphaEvolve: A coding agent for scientific and algorithmic discovery](https://mlsanity.com/paper/2506.13131/) (2025)
- [Large Language Models as Optimizers](https://mlsanity.com/paper/2309.03409/) (2023)
- [Automatic Prompt Optimization with "Gradient Descent" and Beam Search](https://mlsanity.com/paper/2305.03495/) (2023)
- [Eureka: Human-Level Reward Design via Coding Large Language Models](https://mlsanity.com/paper/2310.12931/) (2023)
- [GEPA: Reflective Prompt Evolution Can Outperform Reinforcement Learning](https://mlsanity.com/paper/2507.19457/) (2025)
- [ReEvo: Large Language Models as Hyper-Heuristics with Reflective Evolution](https://mlsanity.com/paper/2402.01145/) (2024)
- [Evolution of Heuristics: Towards Efficient Automatic Algorithm Design Using Large Language Model](https://mlsanity.com/paper/2401.02051/) (2024)
- [ShinkaEvolve: Towards Open-Ended And Sample-Efficient Program Evolution](https://mlsanity.com/paper/2509.19349/) (2025)
- [LLaMEA: A Large Language Model Evolutionary Algorithm for Automatically Generating Metaheuristics](https://mlsanity.com/paper/2405.20132/) (2024)
- [Unleashing the Potential of Large Language Models as Prompt Optimizers: Analogical Analysis with Gradient-based Model Optimizers](https://mlsanity.com/paper/2402.17564/) (2024)
- [DLPO: Towards a Robust, Efficient, and Generalizable Prompt Optimization Framework from a Deep-Learning Perspective](https://mlsanity.com/paper/2503.13413/) (2025)
- [Quant 4.0: Engineering Quantitative Investment with Automated, Explainable and Knowledge-driven Artificial Intelligence](https://mlsanity.com/paper/2301.04020/) (2022)
- [Scaling Textual Gradients via Sampling-Based Momentum](https://mlsanity.com/paper/2506.00400/) (2025)
- [QuantEvolve: Automating Quantitative Strategy Discovery through Multi-Agent Evolutionary Framework](https://mlsanity.com/paper/2510.18569/) (2025)

## Abstract (arXiv)

Quantitative trading strategy design aims to discover trading programs from historical data that remain effective in future markets, which can be viewed as a black-box program optimization problem. LLM-based textual gradients offer a promising approach by providing explicit optimization directions for iterative strategy refinement. However, directly applying textual gradients faces two challenges: (1) optimization is myopic, underutilizing experience from previous evaluations; and (2) aggregate backtest feedback overlooks temporal robustness, potentially favoring strategies that perform well only in specific market periods. To address these challenges, we propose TradeGrad, an experience-guided textual-gradient framework for robust trading strategy optimization. TradeGrad leverages accumulated optimization experience to estimate textual gradients and employs multi-scale revisions for both strategy exploration and refinement. It further introduces the Cross-Period Robust Objective (CPRO), which emphasizes performance in unfavorable historical periods to promote temporal robustness. Experiments on cross-sectional and time-series strategy design in Chinese A-share and U.S. equity markets show that TradeGrad achieves the best in-sample and out-of-sample performance across all four settings. Notably, its Chinese cross-sectional strategy achieves 27.99% annualized return, 12.19% maximum drawdown, and a Sharpe ratio of 1.63, approximately 68% higher than the CSI 300 benchmark. Further analyses validate the proposed components and show consistent improvements in both in-sample and out-of-sample performance throughout optimization. The code is available at https://github.com/transcend-0/TradeGrad.