Intelligent stock trading system based on improved technical analysis and Echo State Network

Authors:
Xiaowei Lin;Zehong Yang;Yixu Song
Affiliations:
State Key Laboratory of Intelligent Technology and System, Tsinghua National Laboratory for Information Science and Technology, Department of Computer Science and Technology, Tsinghua University, ...;State Key Laboratory of Intelligent Technology and System, Tsinghua National Laboratory for Information Science and Technology, Department of Computer Science and Technology, Tsinghua University, ...;State Key Laboratory of Intelligent Technology and System, Tsinghua National Laboratory for Information Science and Technology, Department of Computer Science and Technology, Tsinghua University, ...
Venue:
Expert Systems with Applications: An International Journal
Year:
2011

Citing 5
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Abstract

Stock trading system to assist decision-making is an emerging research area and has great commercial potentials. Successful trading operations should occur near the reversal points of price trends. Traditional technical analysis, which usually appears as various trading rules, does aim to look for peaks and bottoms of trends and is widely used in stock market. Unfortunately, it is not convenient to directly apply technical analysis since it depends on person's experience to select appropriate rules for individual share. In this paper, we enhance conventional technical analysis with Genetic Algorithms by learning trading rules from history for individual stock and then combine different rules together with Echo State Network to provide trading suggestions. Numerous experiments on S&P 500 components demonstrate that whether in bull or bear market, our system significantly outperforms buy-and-hold strategy. Especially in bear market where S&P 500 index declines a lot, our system still profits.