Neural Networks as a Decision Maker for Stock Trading: A Technical Analysis Approach

There has been a growing interest in applying neural networks and technical analysis indicators for predicting future stock behavior. However, previous studies have not practically evaluated the predictive power of technical indicators by employing neural networks as a decision maker to uncover the...

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Bibliographic Details
Published inInternational journal of smart engineering system design Vol. 5; no. 4; pp. 313 - 325
Main Authors Thawornwong, Suraphan, Enke, David, Dagli, Cihan
Format Journal Article
LanguageEnglish
Published Taylor & Francis Group 01.10.2003
Subjects
neural networks
stock prediction
stock trading
technical analysis
technical indicators
trend signal
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Summary:There has been a growing interest in applying neural networks and technical analysis indicators for predicting future stock behavior. However, previous studies have not practically evaluated the predictive power of technical indicators by employing neural networks as a decision maker to uncover the underlying nonlinear pattern of these indicators. The objective of this paper is to investigate if using these indicators as the input variables to a neural network will provide more accurate stock trend predictions, and whether they will yield higher trading profits than the traditional technical indicators. Three neural networks are examined in the study to predict the short-term trend signals of three stocks across different market industries. The overall results indicate that the proportion of correct predictions and the profitability of stock trading guided by these neural networks are higher than those guided by their benchmarks.
ISSN:1025-5818
1607-8500
DOI:10.1080/10255810390245627