Stock Forecast Methods

Stock Market Trading and Investing

How to Use One-day Candle Prediction

Addaptron Software provides prices prediction of major ETFs for the next day. This article describes one of the simplest algorithms to use prediction data. The algorithm consists of four simple rules:

  1. Buy Limit order with predicted Low price is placed before market open.
  2. The order is canceled if it is not completed during the first half of the market day.
  3. Once order is completed, Sell Limit order is placed with predicted High price.
  4. If Sell order is not completed until almost closing market, it is canceled and Sell Market order is executed just before closing stock market.

The following charts and tables demonstrate one of the practical examples of described above approach.

Predicted and actual prices chart (dark green and red filled candles – predicted, light green and red line candles – actual):

Predicted and actual prices chart</a> (dark green and red filled candles – predicted, light green and red line candles – actual)


Predicted and actual prices table:

Predicted and actual prices table


Intraday performance chart (actual prices) for the same period:

Intraday performance chart


The result of using the described algorithm. The example is based on the following assumptions: 100 shares are used for trading, transaction fee is $10 so that 2 transactions (buy and sell) within day cost $20:

Example of using the described algorithm


Another example (symbol BOIL) can be find here

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November 9, 2014 Posted by | Stock Market Forecast, Stock Market Software | , , , | 1 Comment

Stock Market Forecast using Technical Analysis

Many discuss if Stock Market Technical Analysis (SMTA) can be used to predict prices. Normally, there are two camps – the side who believes in SMTA predictability and other who does not. In many particular cases, both sides have a solid evidence to support their point of view.

Stock Market Forecast using Technical Analysis

From a statistical point of view it looks reasonable to search for a good predictability in the areas where random or multi-news driven fluctuations are self-compensating each other. One of such areas is stock market indexes, for example, S&P-500. This index consists of 500 biggest companies which make difficult to easily disrupt an equilibrium that is formed during relatively long time frames.

Indeed, as experiments show, one of the most consistent SMTA prediction ratios can be observed for S&P-500 index. Normally, the ratio of its successful/unsuccessful predictions is within the range of 60-68%. Average root-mean-square deviation of predicted-actual values during one week can fluctuate within 2-9 absolute values of index prices (Open, High, Low, Close prices).

Recently, Addaptron Software introduced a new service – Next Day S&P 500 Index Forecast The forecast is calculated using a multi-model SMTA forecast system. User can order the index forecast for the next day, i.e., candlestick values – Open, High, Low, Close prices. The forecast will be sent to your email address by automated tool.

December 12, 2012 Posted by | Stock Market Forecast | , , , , , | Leave a comment

Elliott Wave: Extracting Extremes and Predicting next One by Neural Network

Article first published as Elliott Wave: Extracting Extremes and Predicting next One by Neural Network on Technorati.

Improved Elliott Wave model can be successfully used as an additional input for making investing decisions in modern market conditions

The Elliott Wave idea is to use in stock market forecast. It is based on a crowd psychology that changes between optimistic and pessimistic trends creating patterns that can be fitted to reoccurred sequences. To use waves for prediction the assumption is made that waves are developing in the sequence of Fibonacci, harmonic, or fractal ratios. So that each wave has a programmed position and characterized by a particular direction and duration with extreme as a reversal point.

In fact, the model has been used by stock market analysts for almost a century. Although it looks very attractive due to its strict formalism and deterministic outcome, its predictive power is weak because of a few reasons. Firstly, the predictive values are dependent on waves that were counted – determining where first and next wave start can be subjective. Secondly, according to Efficient Market Hypothesis, using an exact Elliott Wave model by many traders could lead to the disappearance of the patterns they anticipate. And finally, nowadays one’s trading success based on predictions is rather a chance game in a modern market with its irrational behavior.

The purpose of this research was to explore if Elliott Wave principle can be used these days in stock market forecast. To eliminate the subjectivity in counting waves, Neural Network (NN) was used to analyze and predict waves. Also instead of assuming that waves obey only the sequence of Fibonacci, harmonic, or fractal ratios, a more general approach used – the software processes all extracted waves. Besides, employing NN enables identifying both the price and date of extremes. The first experiment has been done using an artificial data set. The data consist of two sinusoidal functions with different periods. The second group of experiments has been done on real market data.

The main conclusion is that the Elliott Wave idea can be used in predicting stock market. Although it does not generate always accurate and consistent forecasts, its result can be successfully used as an additional input for making a trading or investing decision in modern market conditions.

Elliott Wave: Extracting Extremes and Predicting next One by Neural Network

Charts and calculation results by SMFT-1 (TA-1 sub-system Waves module interface)

October 12, 2011 Posted by | Stock Market Forecast | , , , , , , | Leave a comment

New Trading Decision Support Systems Group on LinkedIn

New Trading Decision Support Systems group on LinkedInThe new group Trading Decision Support Systems is intended to be a resource for individual/institutional traders/investors and software developers in stock market area to share ideas, initiate and participate discussions, benefit from the collective intelligence, and to expand network. It will be primarily focused on such topics as:

  • Trading EOD and intraday different asset classes: trading tips, strategies, why, how, and results.
  • Trading systems: algorithms, methods, technologies, human factor, and statistics.
  • Software tools to support traders decisions: forecast methods, simulations, back-testing, and optimization.
  • Technical Analysis: indicators and chart patterns.
  • Fundamental Analysis: financial ratios and predictive models.
  • News: analysis and formalization by converting to measurable variables to automate systems with contributing news factor.
  • Numerical methods, data processing, artificial intelligence, and modeling in stock market areas.

Many things remain unchangeable in a trading world – supply-demand price balance, greed-fear driven mistakes, as well as, ability to think, make right decisions, and find the best solutions. When once winning approaches, strategies, or methods failed, many traders are prone to analyze the reasons why it happened. Then they create new approaches and develop new successful systems. If systems are automated, it is easy and fast to test them, collect and analyze back-testing and live statistics, and then make necessary improvements. That is why it is important to implement the best ideas in software applications that can be also used by others.

The computational technologies are changing. Systems empowered by Artificial Intelligence have self-learning abilities that enable them to adapt to market changes. One of the purposes of this group is to bring together the developers of decision support software and traders-users for mutual benefits: the developers get more ideas about their products’ improvements and make a better progress in developing software for traders, the users arise issues relating to their needs and wants. Hopefully everyone will find something useful participating in this group.

You are welcome to join this newly created networking group. Be the first to start a relevant discussion, promote your product or service. Please join Trading Decision Support Systems group on LinkedIn!

June 22, 2011 Posted by | Stock Market Forecast, Stock Market Software | , , , , , , , , , , , , , , , , , , | 1 Comment

The Stock Market Is Likely Taking Summer Break

The Stock Market Is Likely Taking Summer Break

S&P-500 Index Drop from May 2 to June 8, 2011

Major stock market indexes slowly went down during the last several weeks, from May 2 to June 8, 2011. Since this decline has already broken a few important technical chart levels, many technical analysts believe that the trend might continue with sideways moves for a few weeks ahead.

Except seasonal reason, this May stock market decline was also caused by fundamental factors. The US corporate profits in the first quarter dropped for the first time in more than two years. The US unemployment rate in May increased from 9.0% to 9.1%. It looks likely that investors overreacted to strong corporate earnings at the beginning of this year. Economists believe that the government stimulus money could have artificially inflated the market. Evidently, without additional money injection the US economy would undergo a transition to a self-sustaining recovery.

From the fundamental point of view it is not clear how precisely the ending of stimulus is reflected in the current market evaluation. So that when the bond-buying program ends at the end of June, the US stock market might reach a more accurate equilibrium. Other surprises might be brought by the second quarter reporting season.

June 9, 2011 Posted by | Stock Market Forecast | , , , , , , , | Leave a comment

The Stock Market Is Entering A Slow Summer Season

The Stock Market Is Entering A Slow Summer Season

Not so long ago, S&P warned the US government of consequences if a massive federal deficit is not fixed; as it was estimated, there is a 33% chance it would lower existing triple-A rating. The US trade deficit worsened. More automobiles and other goods were sold abroad but oil imports increased. So that high oil prices is one of the reasons that the trade deficit rose 6% in March from February. The unemployment monthly rate slightly grew, from 8.8% to 9%. The productivity growth slowed in the 1st quarter.

However, long-term fundamentals look strong. During the last several quarters in a row, the US biggest corporations had stronger revenues and better profits. The recent slight correction in commodities prices will help the economy growth. The current market weakness can be partly explained by typical for this time of year assets re-location – many big investors are making summer seasonal adjustments to their portfolios. They are switching to cash and bonds trying to anticipate a statistically known summer market slowdown.

May 25, 2011 Posted by | Stock Market Forecast | , , , , , , | Leave a comment

February Is the Month of a Slight Correction

With positive US earnings forecast for this year, 2011 is set to be one of the best years after the recession. Additionally, it is a good stock market timing of the presidential election cycle. According to many experts, this bull market will have more room to run. On the negative side, the US economy still remains too weak to help a high unemployment rate. Although the economy is improving, it is a slow recovery. Besides, this year the US government’s deficit might surge to a record $1.5 trillion.

S&P-500 reached a 2.5-year high level and now there is no much pressure to push the market down. However, bad economic or market-related news might easily cause a short-term correction. Another trigger could be a continuing downtrend of Indian Market that is currently already at a several-month low level. From the technical analysis view, according to the last 10-year S&P-500 statistics, February is the month of a slight correction.

10-year S&P-500 index statistics of monthly performance

Chart shows 10-year S&P-500 index statistics of monthly performance (calculated by Stock Market Predictor SMAP-3)

February 11, 2011 Posted by | Stock Market Forecast | , , , , , , , | Leave a comment

S&P-500 Index Cycle Analysis Forecast for the Next Several Years

There is a simple forecast that is built on assumption that the stock market has a cyclical nature. The cycles may not be stable all the time but the probability of repeating cycles can be high enough to use the cycles by stock traders and investors for their benefits. The cyclical nature of the market can be masked by more powerful factors (fundamental data, bad/good news, global events, etc.) that over-drive the market time-from-time. Many technical analysts use cycle predictions in their comprehensive analysis.

One of the result-sensitive parameters in the cycle analysis prediction is a historical period that used to extract the cycles from a curve. The prediction can be very different depending on the historical period that is chosen. One of the stable cycles that is observed for the recent decade is a seven-year period. The chart below shows S&P-500 index forecast for the next several years. The calculation has been performed using Stock Market Predictor SMAP-3. According to this forecast the stock market might continue its uptrend with natural short-term small-amplitude sub-cycles until 2012-2013.

S&P-500 Index Cycle Analysis Forecast for the Next Several Years

December 29, 2010 Posted by | Stock Market Forecast, Stock Market Software | , , , , , , , | Leave a comment

Until the Middle of November S&P-500 Might Be Still Good

The stock market during a month ahead might be driven by a few expected fundamental news. Nevertheless, technical factors can give some additional momentum for the market. In October, S&P-500 gained more than 3%. The last four weeks, S&P-500 weekly performance was 1.65%, 0.95%, 0.59%, and 0.02%. The trend does not look optimistic. However, according to a cycle analysis, October’s uptrend cycle can be still intact. The chart shows a possible resumption of uptrend until November 11:

Until the Middle of November S&P-500 Might Be Still Good

The forecast was calculated using software tool SMAP-3. A cycle prediction is based on the hypothesis that statistically revealed cycles may be repeatable in the future and, therefore, they can be used to build the summarized curve of future movements.

October 31, 2010 Posted by | Stock Market Forecast | , , , , , , , | Leave a comment

Technically S&P-500 May Be More Green than Red for the Next Two Weeks

Technically, S&P-500 index expected to be bullish during the period of October 4-15, 2010. According to the results of two different software tools for stock market, the behavior of the index is predicted as somehow between uptrend and sideways. However, technical predictions may be overwritten by changed fundamental-based expectations. The technical indicators are built on a historical predisposition and may work well if other informational factors are unavailable or new information still keeps the existing balance of future expectations. Technical methods are unable to predict most fundamental news, for example, the numbers of GDP or unemployment rate that will be announced.

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