Automated Trading Point Forecasting Based on Bicluster Mining and Fuzzy Inference

Abstract

Historical financial data are frequently used in technical analysis to identify patterns that can be exploited to achieve trading profits. Although technical analysis using a variety of technical indicators has proven to be useful for the prediction of price trends, it is difficult to use them to formulate trading rules that could be used in an automatic trading system due to the vague nature of the rules. Moreover, it is challenging to determine a specified combination of technical indicators that can be used to detect good trading points and trading rules since different stock may be affected by different set of factors. In this paper, we propose a novel trading point forecasting framework that incorporates a bicluster mining technique to discover significant trading patterns, a method to establish the fuzzy rule base, and a fuzzy inference system optimized for trading point prediction. The proposed method (called BM-FM) was tested on several historical stock datasets and the average performance was compared with the conventional buy-and-hold strategy and five previously reported intelligent trading systems. Experimental results demonstrated the superior performance of the proposed trading system.