FinMem: A Performance-Enhanced LLM Trading Agent With Layered Memory and Character Design

Abstract

We introduce FinMem, a novel Large Language Models (LLM)-based agent framework for financial trading, designed to address the need for automated systems that can transform real-time data into executable decisions. FinMem comprises three core modules: Profile for customizing agent characteristics, Memory for hierarchical financial data assimilation, and Decision-making for converting insights into investment choices. The Memory module, which mimics human traders’ cognitive structure, offers interpretability and real-time tuning while handling the critical timing of various information types. It employs a layered approach to process and prioritize data based on its timeliness and relevance, ensuring that the most recent and impactful information is given appropriate weight in decision-making. FinMem’s adjustable cognitive span allows retention of critical information beyond human limits, enabling it to balance historical patterns with current market dynamics. This framework facilitates self-evolution of professional knowledge, agile reactions to investment cues, and continuous refinement of trading decisions in financial environments. When compared against advanced algorithmic agents using a large-scale real-world financial dataset, FinMem demonstrates superior performance across classic metrics like Cumulative Return and Sharpe ratio. Further tuning of the agent’s perceptual span and character setting enhances its trading performance, positioning FinMem as a cutting-edge solution for automated trading.