Abstract
The goal of this paper is forecasting direction (increase or decrease) of EURJPY exchange rate in a day. For this purpose five major indicators are used. The indicators are exponential moving average (EMA), stochastic oscillator (KD), moving average convergence divergence (MACD), relative strength index (RSI) and Williams %R (WMS %R). Then a hybrid approach using hidden Markov models and CART classification algorithms is developed. Proposed approach is used for forecasting direcation (increase or decrease) of Euro-Yen exchange rates in a day. Also the approach is used for forecasting differnece between intial and maximum exchange rates in a day. As well as it is used for forecasting differnece between intial and minimum exchange rates in a day. Reslut of proposed method is compared with CART and neural network. Comparison shows that the forecasting with proposed method has higher accuracy.
Highlights
Journal of Advanced Computer Science & Technology In foreign exchange market (Forex) market, usually profit, loss and exchange rate changes are stated on the basis of the Pip
Analysis and forecasting are performed on the basis of the exchange rate and technical indicators such as moving average, relative strength index (RSI) and etc
In this paper a hybrid approach from hidden Markov model (HMM) and CART classification algorithm is used for forecasting about euro-yen (That is called EURJPY) exchange rate
Summary
In Forex market, usually profit, loss and exchange rate changes are stated on the basis of the Pip. For example consider that EURJPY exchange rate changes from 158.75 to 158.76. In this condition it is said that EURJPY exchange rate increases one pip. If EURUSD exchange rate changes from 1.4595 to 1.4594, it is said that EURUSD exchange rate decreases one pip. At whole one pip is equal to one unit change in the last digit of exchange rate. There are two general approaches for analysis and forecasting in Forex market. Analysis and forecasting are performed on the basis of the exchange rate and technical indicators such as moving average, RSI and etc. Analysis and forecasting are performed on the basis of the immense variables such as interest rate, unemployment rate, GDP and etc. Political events and immense decisions has affected on the fundamental analysis
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