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

ABSTRACT: 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 two-day and three-day patterns for one-day-ahead forecasts can be profitable.

SUBMITTER: Lin Y

PROVIDER: S-EPMC8345893 | biostudies-literature |

REPOSITORIES: biostudies-literature

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Project description:BACKGROUND:Atrial Fibrillation is the most common arrhythmia worldwide with a global age adjusted prevalence of 0.5% in 2010. Anticoagulation treatment using warfarin or direct oral anticoagulants is effective in reducing the risk of AF-related stroke by approximately two-thirds and can provide a 10% reduction in overall mortality. There has been increased interest in detecting AF due to its increased incidence and the possibility to prevent AF-related strokes. Inexpensive consumer devices which measure the ECG may have the potential to accurately detect AF but do not generally incorporate diagnostic algorithms. Machine learning algorithms have the potential to improve patient outcomes particularly where diagnoses are made from large volumes or complex patterns of data such as in AF. METHODS:We designed a novel AF detection algorithm using a de-correlated Lorenz plot of 60 consecutive RR intervals. In order to reduce the volume of data, the resulting images were compressed using a wavelet transformation (JPEG200 algorithm) and the compressed images were used as input data to a Support Vector Machine (SVM) classifier. We used the Massachusetts Institute of Technology (MIT)-Beth Israel Hospital (BIH) Atrial Fibrillation database and the MIT-BIH Arrhythmia database as training data and verified the algorithm performance using RR intervals collected using an inexpensive consumer heart rate monitor device (Polar-H7) in a case-control study. RESULTS:The SVM algorithm yielded excellent discrimination in the training data with a sensitivity of 99.2% and a specificity of 99.5% for AF. In the validation data, the SVM algorithm correctly identified AF in 79/79 cases; sensitivity 100% (95% CI 95.4%-100%) and non-AF in 328/336 cases; specificity 97.6% (95% CI 95.4%-99.0%). CONCLUSIONS:An inexpensive wearable heart rate monitor and machine learning algorithm can be used to detect AF with very high accuracy and has the capability to transmit ECG data which could be used to confirm AF. It could potentially be used for intermittent screening or continuously for prolonged periods to detect paroxysmal AF. Further work could lead to cost-effective and accurate estimation of AF burden and improved risk stratification in AF.

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

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