Stock Forecast Methods

Stock Market Trading and Investing

Pattern Prediction Worked This Time – Is Stock Market Predictive?

The last two-week prediction using pattern similarity was pretty good:

Pattern Prediction Worked This Time - Is Stock Market Predictive

The question is if we can trust and use the only one such prediction for investing. Pattern recognition system is based on the statistical classification of patterns assuming that the patterns are generated by a probabilistic system. “Probabilistic” means that sometimes an expected thing happens, sometimes does not. Yes, some patterns can be repeatable in the future, therefore, the selected present patterns can be used to predict the future pattern. However, statistics evidence that the prediction can be wrong.

Basically, average stock prices are almost continuous function of fundamentals. The stock market performance depends on the strength of the companies and the economy as a whole. Such things are quite transparent and predictive to a certain extend. Least predictive factors (noise) are natural disaster,
political event, published news, investors’ psychological reaction to news or event, etc.

If we try to calculate the value of “patterns” predictive factor, it might be a relatively small amount – around 20-40%. So that it is wise to analyze information from multiple sources to make a more comprehensive conclusion. There is always a risk involved in stock investing. In fact, historically a stock market crash is a result of combination of all factors – short, medium, and long terms, predictive and non-predictive. “Non-predictive” means – there is no way to know for sure about this in advance.

© Alex Shmatov. Published with permission of the copyright owner. Further reproduction strictly prohibited without permission.

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August 28, 2010 Posted by | Stock Market Forecast | , , , , , , | Leave a comment

Stock Market Forecast for August 16-27 by Pattern Similarity

A pattern recognition system is to classify data based on statistical information excerpted from the data. Normally, a pattern recognition system consists of data input, converter, an extraction processor to classify accordingly to descriptive scheme, and output grouped data. The statistical classification of patterns assumes that the patterns are generated by a probabilistic system.

Some patterns can be repeatable in the future, therefore, we can use selected present patterns to predict the future pattern. Investment Analyzer InvAn-4 (IA) by Addaptron Software has an extra feature to predict stock or index prices using pattern similarity. The prediction period can be chosen within a range 1..60 trading days; the period of historical data that used for matching recommended in 4..16 times longer than prediction period. IA searches for the best matches by scanning all historical data from the internal database.

IA ranks all possible matches on the basis of maximum correlation and minimum deviation within given historical period. IA performs pattern matching using open, high, low, and close prices and volume data. When scanning is completed, IA composes forecast using several best matched patterns (top ranked). Since the statistical regularities of the patterns help to create more stable picture, IA allows adding up many top-rated patterns. The composite result is built as a weighted average with weights proportionally pattern ranks.

The chart below shows S&P-500 Index forecast for August 16-27, 2010 by Investment Analyzer. The forecast is a small uptrend and then a bigger downtrend:

Stock Market Forecast for August 16-27 by Pattern Similarity

Nothing in this piece or blog should be construed as investment advice in any way. Always do our own research or/and consult a qualified investment advisor. It is wise to analyze data from multiple sources and draw your own conclusions based on the soundest principles. Be aware of the risks involved in stock investments

August 14, 2010 Posted by | Stock Market Forecast, Stock Market Software | , , , , , , , , , , | Leave a comment

S&P-500 Forecast for the First Two Weeks of August on the Basis of Technical Indicators Signals

There are many technical indicators. And there are many interpretations of each indicator’s signal. Some stock investors and traders use particular favorite indicators and insist on own interpretation. Who is right? What if to allow a computer program to decide using back-testing which indicator should be trusted more and another less for particular market conditions and a specific stock?

One of computer programs that enables to compose the forecast with weights accordingly to predictive ability of each technical indicator is Investment Analyzer InvAn-4. It performs a short-term (10 trading days) forecast using Neural Network. The chart below shows an example of such forecast. It is S&P-500 forecast for the first two weeks of August, 2010.

S&P-500 Forecast for the First Two Weeks of August on the Basis of Technical Indicators Signals

Nothing in this piece or blog should be construed as investment advice in any way. Always do our own research or/and consult a qualified investment advisor. It is wise to analyze data from multiple sources and draw your own conclusions based on the soundest principles. Be aware of the risks involved in stock investments

August 3, 2010 Posted by | Stock Market Forecast, Stock Market Software | , , , , , , , , , , , , | Leave a comment