Stock trading neural network

Neural Networks: Forecasting Profits

I have finally developed an application framework for testing trade systems in stock exchanges and now I'm going to implement my first neural network in it. Very simple and primitive one, not intended for real trading, just for starters.

And if you see I'm missing something or I'm wrong about something or you have an idea of what could help a begginer in a field of neural networks in market trading, that would just make me super-happy: I imagine that the best activation function to use is the I'm no profound mathematician. With a back propagation learning I teach the network that for the 40 inputs, there is 1 output and this output is one of these numbers. I'm imagining that after learning, the network output will be always some number close to -1, 1 or 0 and it's just up to me where I set the threshold for buying or selling.

Everywhere on the internet, the output for learning people are giving the back propagation learning machine are the future values of the market chart and not the expected money yield of a different trade entries buy or sell.

I consider that a bad approach because I'm not interested in the future chart values but in the money I want to earn. I intend to build a neural network for automated trading, not for decision helping. First, there are many gambles which usually win, but which are bad gambles.

This has a negative expected value, but the way you are training the neural network would teach it to recommend such reverse lottery tickets. Second, you are missing a big point of the stock exchange, which is to manage risk. What determines the price of an investment is not just its return, it is the return versus the risk which can't be hedged away. Investments with high returns and high risks are not necessarily better than investments with low returns and low risk.

An investment with a negative rate of return may still be valuable if it is strongly negatively correlated with a risky investment with a high rate of return. So, the rate of return is insufficient for evaluating investments. Third, you should realize that you are competing with other people who also have access to neural networks. There are a lot of commercial programs aimed at day traders based on neural networks.

These are made by people who find it more profitable to sell software to confused day traders than to use their own systems. There are many proprietary systems, some of which may involve neural networks. To find value they overlook, you need to have some advantage, and you haven't mentioned any. I'm a big fan of neural networks, but I think typical users of neural networks in the stock market do not understand the basics and burn money.

Did I miss anything? Then you can just use the standard logistic sigmoid activation function. By posting your answer, you agree to the privacy policy and terms of service.

Forex/Stock Day Trading Software with Neural Net Forecasting

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Questions Tags Users Badges Unanswered. Cross Validated is a question and answer site for people interested in statistics, machine learning, data analysis, data mining, and data visualization. Join them; it only takes a minute: Here's how it works: Anybody can ask a question Anybody can answer The best answers are voted up and rise to the top. Using neural network for trading in stock exchange.

I've dived into the field of neural networks and I became enthralled with them. I only want to know if my approach is good approach. For these 40 inputs, I know 2 numbers. Is this a right way to use a neural network? Mirek 1 1 8. Considering Geoff Hinton isn't a multibillionare, I'd say it won't work as well as you think it will. All kidding aside, you could use an existing architecture that maps into future values and feed it into an additional layer which does some classification like you propose.

I think the idea behind those existing nets is that based on the prices, a savvy trader can make their own decision on whether, e. I can understand that people want to use neural networks as decision helpers. I'll edit the post becuase it is indeed an important clarification that I want to go further and use neural networks for automated trading as well.

There are severe flaws with this approach. Douglas Zare 7, 1 19 I'm well aware of the risk management, thought I wasn't well aware how would risk management perform for this primitive task but I wasn't expecting miracles.

Neural networks and the stock market – Nelson Cash

And yes, I actually want to know neural networks well, that's the reason why I am building it myself. That's the advantage I'm seeking.

These are made by people who find it more profitable to sell software to confused day traders than to use their own systems That on its own would have been worth an upvote. Chunming Wang 59 7. Sign up or log in StackExchange. Sign up using Facebook.

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