Ran a simulation study and gave a trading agent market regime label directly in its state. It ignored it.

Perturbation analysis

Ran a simulation study on regime-aware trade execution. Trained three PPO agents: one blind to regime, one with the regime label in its observation, one with a regime-conditioned reward function.

The agent with the label performed almost identically to the blind agent. Flipping the label changed its action by ~0.04 on a 0-1 scale. And the direction was inverted, it executed slightly more in bear markets.

The failure is structural: PPO converges to a "just execute steadily" local optimum that avoids penalties but never learns to exploit regime structure. Having the information doesn't mean the optimizer will use it.

This empirically justifies why hierarchical architectures like EarnHFT and TradeR exist, but no one had actually tested whether a flat agent with regime info could succeed first. Now there's data.

Full write-up: Medium

Research Paper: SSRN