Combining rules between PIPs and SAX to identify patterns in financial markets

...................................................................................................................................................iii List of Tables ...........................................................................................................................................vii List of Figures .......................................................................................................................................... ix List of Acronyms and Abbreviations ........................................................................................................ xi Chapter 1 Introduction......................................................................................................................... 1 1.1 Work’s Purpose ............................................................................................................................... 1 1.2 Main Contributions .......................................................................................................................... 2 1.3 Document Structure ........................................................................................................................ 2 Chapter 2 – Related work ...................................................................................................................... 3 2.1 Market Analysis ............................................................................................................................... 3 2.1.1 Fundamental Analysis ............................................................................................................. 3 2.1.2 Technical Analysis ................................................................................................................... 3 2.1.2.1 Technical Indicators ......................................................................................................... 4 2.1.2.2 Chart Patterns .................................................................................................................. 7 2.2 Optimization Methodologies – Genetic Algorithms ....................................................................... 11 2.3 Pattern Detection Methodologies .................................................................................................. 12 2.3.1 Heuristic Based on Templates ............................................................................................... 12 2.3.2 Perceptually Important Points (PIPs) ..................................................................................... 17 2.3.3 Symbolic Aggregate approXimation (SAX) representation ................................................... 20 Chapter 3 – SIR/GA approach ............................................................................................................. 25 3.1 Time series representation............................................................................................................ 25 3.2 Investment rules ............................................................................................................................ 30 3.4 System’s architecture .................................................................................................................... 36 3.4.1 User Interface ........................................................................................................................ 36 3.4.2 Trading Algorithm................................................................................................................... 37 3.4.3 Financial Data ........................................................................................................................ 39 Chapter 4 – Experiments and results ................................................................................................. 41 4.1 Evaluation metrics ......................................................................................................................... 41 4.2 Case studies .................................................................................................................................. 41 4.2.1 Case study no1 ....................................................................................................................... 42 4.2.2 Case study no2 ....................................................................................................................... 52 4.2.3 Case study no3 ....................................................................................................................... 57 Chapter 5 – Conclusions and future work ......................................................................................... 61 References ............................................................................................................................................. 62 Appendix A ............................................................................................................................................. 64 Appendix B ............................................................................................................................................. 65