In this research, we focus on the short-term price trend prediction. We mark the price trend by comparing the current closing price with the closing price of n trading days ago, the range of n is from 1 to 10 since our research is focusing on the short-term. If the price trend goes up, we mark it as 1 or mark as 0 in the opposite case. To be more specified, we use the indices from the indices of n−1th day to predict the price trend of the nth day. OTC stocks are not subject to the same public reporting regulations as stocks listed on exchanges, so it is not as easy for investors to obtain reliable information on the companies issuing such stocks. Stocks in the OTC market are typically much more thinly traded than exchange-traded stocks, which means that investors often must deal with large spreads between bid and ask prices for an OTC stock. In contrast, exchange-traded stocks are much more liquid, with relatively small bid-ask spreads.
Besides, the optimizer of feature selection was also applied before the data processing to improve the prediction accuracy and reduce the computational complexity of processing daily stock index data. Though they optimized the feature selection part and split the sample data into small clusters, it was already strenuous to train daily stock index data of this model. It would be difficult for this model to predict trading activities in shorter time intervals since the data volume would be increased drastically. AAPL stock price From the confusion matrices in Fig.9, we can see all the machine learning models perform well when training with the full feature set we selected by RFE. From the perspective of training time, training the NB model got the best efficiency. LR algorithm cost less training time than other algorithms while it can achieve a similar prediction result with other costly models such as SVM and MLP. RAF algorithm achieved a relatively high true-positive rate while the poor performance in predicting negative labels.
IBD stocks showing strong relative price strength and top fundamentals. Get unlimited access to IBD’s stock idea lists, exclusive ratings and unmatched market analysis. This section provides comprehensive details on the algorithms we built while utilizing and customizing different existing techniques. Details about the terminologies, parameters, as well as optimizers.
Until the early 1600s, a bourse was not exactly a stock exchange in its modern sense. Over the short-term, stocks and other securities DotBig can be battered or bought by any number of fast market-changing events, making the stock market behavior difficult to predict.
All content is provided for informational purposes only , and is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The views, opinions and advice of any third party reflect those of the individual authors and are not endorsed by TMX Group Limited or its affiliates. TMX Group Limited and its affiliates have not prepared, reviewed or updated the content of third parties on this site or the content of any third party sites, and assume no responsibility for such information. In margin buying, the trader borrows money to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks’ value.
- The next step is to test the feature set of all 8 features we selected in the previous subsection.
- Since our proposed solution is also focusing on short-term stock price trend prediction, this work is heuristic for our system design.
- Research is provided for informational purposes only, does not constitute advice or guidance, nor is it an endorsement or recommendation for any particular security or trading strategy.
- The authors have introduced the description of the background knowledge in detail.
- An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market.
- The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market.
The authors proposed an optimized model for selection and scoring of stocks. Different from the prediction model, the authors more focused on stock rankings, selection, and performance evaluation. But in the model validation part, they did not compare the model with existed algorithms but the statistics of the benchmark, which made it challenging to identify if GA would outperform other algorithms. Besides comparing the performance across popular machine learning models, we also evaluated how the PCA algorithm optimizes the training procedure of the proposed LSTM model. We recorded the confusion matrices comparison between training the model by 29 features and by five principal components in Fig.11.
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], many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for such large and apparently non-random price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and value at risk limits, theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian .
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If it performs the normalization before PCA, both true positive rate and true negative rate are decreasing by approximately 10%. This test also proved that the best feature pre-processing method for our feature set is exploiting the max–min scale. Feature extension is one of the novelties of our proposed price trend predicting system. Stock Price Online In the feature extension procedure, we use technical indices to collaborate with the heuristic processing methods learned from investors, which fills the gap between the financial research area and technical research area. Some investors prefer long-term investments, while others show more interest in short-term investments.
Because some of the features after RFE are percentage data, while others are very large numbers, i.e., the output from RFE are in different units. Thus, before feeding the data into the PCA algorithm , a feature pre-processing is necessary. We also illustrate the effectiveness and methods DotBig comparison in “Results” section. Since we plan to model the data into time series, the number of the features, the more complex the training procedure will be. So, we will leverage the dimensionality reduction by using randomized PCA at the beginning of our proposed solution architecture.
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The normalized confusion matrix of testing the two feature sets are illustrated in Fig.5. The left one is the confusion matrix of the feature set with expanded features, and the right one besides is the test result of using original features only. Both precisions of true positive and true negative have been improved by 7% and 10%, respectively, which proves that our feature extension method design https://dotbig.com/markets/stocks/AAPL/ is reasonably effective. We used two different approaches to evaluate feature effectiveness. The first method is to combine all the data into one large matrix and evaluate them by running the RFE algorithm once. Another method is to run RFE for each individual stock and calculate the most effective features by voting. The RFE algorithm is known to have suffered from the over-fitting problem.
The system design and feature selection logic are fascinating, which worth referring to. Their findings in optimization algorithms are also valuable for the research in the stock market price prediction research domain. It is worth trying the Bat algorithm when constructing neural network models. Because the resulting structure of our proposed solution is different from most of the related works, it would be difficult to make naïve Stock Price Online comparison with previous works. For example, it is hard to find the exact accuracy number of price trend prediction in most of the related works since the authors prefer to show the gain rate of simulated investment. Gain rate is a processed number based on simulated investment tests, sometimes one correct investment decision with a large trading volume can achieve a high gain rate regardless of the price trend prediction accuracy.