Improving stock trading decisions based on pattern recognition using machine learning technology

Discussion in 'Technical Analysis' started by TrAndy2022, May 12, 2023.

  1. Improving stock trading decisions based on pattern recognition using machine learning technology

    PRML, a novel candlestick pattern recognition model using machine learning methods, is proposed to improve stock trading decisions. Four popular machine learning methods and 11 different features types are applied to all possible combinations of daily patterns to start the pattern recognition schedule. Different time windows from one to ten days are used to detect the prediction effect at different periods. An investment strategy is constructed according to the identified candlestick patterns and suitable time window. We deploy PRML for the forecast of all Chinese market stocks from Jan 1, 2000 until Oct 30, 2020. Among them, the data from Jan 1, 2000 to Dec 31, 2014 is used as the training data set, and the data set from Jan 1, 2015 to Oct 30, 2020 is used to verify the forecasting effect. Empirical results show that the two-day candlestick patterns after filtering have the best prediction effect when forecasting one day ahead; these patterns obtain an average annual return, an annual Sharpe ratio, and an information ratio as high as 36.73%, 0.81, and 2.37, respectively. After screening, three-day candlestick patterns also present a beneficial effect when forecasting one day ahead in that these patterns show stable characteristics. Two other popular machine learning methods, multilayer perceptron network and long short-term memory neural networks, are applied to the pattern recognition framework to evaluate the dependency of the prediction model. A transaction cost of 0.2% is considered on the two-day patterns predicting one day ahead, thus confirming the profitability. Empirical results show that applying different machine learning methods to twoday and three-day patterns for one-day-ahead forecasts can be profitable.
    murray t turtle and kmiklas like this.
  2. %%
    Sounds like it may work well in that specific market:caution::caution:
    Project Pro tests , using machine learning to ''predict'' in US markets seems to '' perform poorly'' in the real world. Especially the virus related trends.
    But I haven't done a study on all 250+ of their tests......[APR23,2023, last update; edit found that with google search.]
  3. SunTrader


    The more things change, the more things stay the same - from back in the day late 90's/early 2000's period

    V. 12:14 (654-656): Candlestick Forecaster, Master Edition Version 4.1 by John Sweeney
  4. SunTrader