A genetic network programming with learning approach for enhanced stock trading model

In this paper, an enhancement of stock trading model using Genetic Network Programming (GNP) with Sarsa Learning is described. There are three important points in this paper: First, we use GNP with Sarsa Learning as the basic algorithm while both Technical Indices and Candlestick Charts are introduced for efficient stock trading decision-making. In order to create more efficient judgment functions to judge the current stock price appropriately, Importance Index (IMX) has been proposed to tell GNP the timing of buying and selling stocks. Second, to improve the performance of the proposed GNP-Sarsa algorithm, we proposed a new method that can learn the appropriate function describing the relation between the value of each technical index and the value of the IMX. This is an important point that devotes to the enhancement of the GNP-Sarsa algorithm. The third point is that in order to create more efficient judgment functions, sub-nodes are introduced in each node to select appropriate stock price information depending on the situations and to determine appropriate actions (buying/selling). To confirm the effectiveness of the proposed method, we carried out the simulation and compared the results of GNP-Sarsa with other methods like GNP with Actor Critic, GNP with Candlestick Chart, GA and Buy&Hold method. The results shows that the stock trading model using GNP-Sarsa outperforms all the other methods.     

Application of evolutionary computation for rule discovery in stock algorithmic trading: A literature review

Despite the wide application of evolutionary computation (EC) techniques to rule discovery in stock algorithmic trading (AT), a comprehensive literature review on this topic is unavailable. Therefore, this paper aims to provide the first systematic literature review on the state-of-the-art application of EC techniques for rule discovery in stock AT. Out of 650 articles published before 2013 (inclusive), 51 relevant articles from 24 journals were confirmed. These papers were reviewed and grouped into three analytical method categories (fundamental analysis, technical analysis, and blending analysis) and three EC technique categories (evolutionary algorithm, swarm intelligence, and hybrid EC techniques). A significant bias toward the applications of genetic algorithm-based (GA) and genetic programming-based (GP) techniques in technical trading rule discovery is observed. Other EC techniques and fundamental analysis lack sufficient study. Furthermore, we summarize the information on the evaluation scheme of selected papers and particularly analyze the researches which compare their models with buy and hold strategy (B&H). We observe an interesting phenomenon where most of the existing techniques perform effectively in the downtrend and poorly in the uptrend, and considering the distribution of research in the classification framework, we suggest that this phenomenon can be attributed to the inclination of factor selections and problem in transaction cost selections. We also observe the significant influence of the transaction cost change on the margins of excess return. Other influenced factors are also presented in detail. The absence of ways for market trend prediction and the selection of transaction cost are two major limitations of the studies reviewed. In addition, the combination of trading rule discovery techniques and portfolio selection is a major research gap. Our review reveals the research focus and gaps in applying EC techniques for rule discovery in stock AT and suggests a roadmap for future research.     

Ensemble learning of rule-based evolutionary algorithm using multi-layer perceptron for supporting decisions in stock trading problems

Classification is a major research field in pattern recognition and many methods have been proposed to enhance the generalization ability of classification. Ensemble learning is one of the methods which enhance the classification ability by creating several classifiers and making decisions by combining their classification results. On the other hand, when we consider stock trading problems, trends of the markets are very important to decide to buy and sell stocks. In this case, the combinations of trading rules that can adapt to various kinds of trends are effective to judge the good timing of buying and selling. Therefore, in this paper, to enhance the performance of the stock trading system, ensemble learning mechanism of rule-based evolutionary algorithm using multi-layer perceptron (MLP) is proposed, where several rule pools for stock trading are created by rule-based evolutionary algorithm, and effective rule pools are adaptively selected by MLP and the selected rule pools cooperatively make decisions of stock trading. In the simulations, it is clarified that the proposed method shows higher profits or lower losses than the method without ensemble learning and buy&hold.     

An integrated framework of genetic network programming and multi-layer perceptron neural network for prediction of daily stock return: An application in Tehran stock exchange market

Evolutionary algorithms are generally used to find or generate the best individuals in a population. Whenever these algorithms are applied to agent systems, they will lead to optimal solutions. Genetic Network Programming (GNP), which contains graph networks, is one of the developed evolutionary algorithms. When the aim is to forecast the share price or return, ascending and descending trends, volatilities, recent returns, fundamental and technical factors have remarkable impacts on the prediction. This is why technical indicators are used to constitute a set of trading rules. In this paper, we apply an integrated framework consisting of GNP model along with a reinforcement learning and Multi-Layer Perceptron (MLP) neural network to classify data and also time series models to forecast the stock return. Moreover, we utilize rules of accumulation based on the GNP model’s results to forecast the return. The aim of using these models alongside one another is to estimate one-day return. The results derived from 9 stocks with regard to the Tehran Stock Exchange Market. GNP extracts a prodigious number of rules on the basis of 5 technical indicators with 3 times period. Next, MLP network classifies data and finds the similarity between future data and past data concerning a stock (5 sub-period) through classification. Subsequently, a number of conditions are established, in order to choose the best estimation between GNP-RL and ARMA. Distinct comparison with the ARMA–GARCH model, which is operated for return estimation and risk measurement in many researches, demonstrates an extended forecasting power of the proposed model, by the name of GNP–ARMA, reducing error by a mean of 16%.     

A hybrid stock trading system for intelligent technical analysis-based equivolume charting

This paper presents the use of an intelligent hybrid stock trading system that integrates neural networks, fuzzy logic, and genetic algorithms techniques to increase the efficiency of stock trading when using a volume adjusted moving average (VAMA), a technical indicator developed from equivolume charting. For this research, a neuro–fuzzy-based genetic algorithm (NF-GA) system utilizing a VAMA membership function is introduced. The results show that the intelligent hybrid system takes advantage of the synergy among these different techniques to intelligently generate more optimal trading decisions for the VAMA, allowing investors to make better stock trading decisions.     

Evolving choice structures for genetic programming

It is quite difficult but essential for Genetic Programming (GP) to evolve the choice structures. Traditional approaches usually ignore this issue. They define some “if-structures” functions according to their problems by combining “if-else” statement, conditional criterions and elemental functions together. Obviously, these if-structure functions depend on the specific problems and thus have much low reusability. Based on this limitation of GP, in this paper we propose a kind of termination criterion in the GP process named “Combination Termination Criterion” (CTC). By testing CTC, the choice structures composed of some basic functions independent to the problems can be evolved successfully. Theoretical analysis and experiment results show that our method can evolve the programs with choice structures effectively within an acceptable additional time.     

Modifying genetic programming for artificial neural network development for data mining

The development of artificial neural networks (ANNs) is usually a slow process in which the human expert has to test several architectures until he finds the one that achieves best results to solve a certain problem. However, there are some tools that provide the ability of automatically developing ANNs, many of them using evolutionary computation (EC) tools. One of the main problems of these techniques is that ANNs have a very complex structure, which makes them very difficult to be represented and developed by these tools. This work presents a new technique that modifies genetic programming (GP) so as to correctly and efficiently work with graph structures in order to develop ANNs. This technique also allows the obtaining of simplified networks that solve the problem with a small group of neurons. In order to measure the performance of the system and to compare the results with other ANN development methods by means of evolutionary computation (EC) techniques, several tests were performed with problems based on some of the most used test databases in the Data Mining domain. These comparisons show that the system achieves good results that are not only comparable to those of the already existing techniques but, in most cases, improve them.     

Evolutionary-computer-assisted design of image operators that detect interest points using genetic programming

This work describes a way of designing interest point detectors using an evolutionary-computer-assisted design approach. Nowadays, feature extraction is performed through the paradigm of interest point detection due to its simplicity and robustness for practical applications such as: image matching and view-based object recognition. Genetic programming is used as the core functionality of the proposed human-computer framework that significantly augments the scope of interest point design through a computer assisted learning process. Indeed, genetic programming has produced numerous interest point operators, many with unique or unorthodox designs. The analysis of those best detectors gives us an advantage to achieve a new level of creative design that improves the perspective for human-machine innovation. In particular, we present two novel interest point detectors produced through the analysis of multiple solutions that were obtained through single and multi-objective searches. Experimental results using a well-known testbed are provided to illustrate the performance of the operators and hence the effectiveness of the proposal.     

Internal reinforcement in a connectionist genetic programming approach

Genetic programming (GP) can learn complex concepts by searching for the target concept through evolution of a population of candidate hypothesis programs. However, unlike some learning techniques, such as Artificial Neural Networks (ANNs), GP does not have a principled procedure for changing parts of a learned structure based on that structure's performance on the training data. GP is missing a clear, locally optimal update procedure, the equivalent of gradient-descent backpropagation for ANNs. This article introduces a new algorithm, “internal reinforcement”, for defining and using performance feedback on program evolution. This internal reinforcement principled mechanism is developed within a new connectionist representation for evolving parameterized programs, namely “neural programming”. We present the algorithms for the generation of credit and blame assignment in the process of learning programs using neural programming and internal reinforcement. The article includes a comprehensive overview of genetic programming and empirical experiments that demonstrate the increased learning rate obtained by using our principled program evolution approach.     

A novel, rule-based technical pattern identification mechanism: Identifying and evaluating saucers and resistant levels in the US stock market

This paper has two main purposes. The first one is the development of a rigorous rule-based mechanism for identifying the rounding bottoms (also known as saucers) pattern and resistant levels. The design of this model is based solely on principles of technical analysis, and thus making it a proper system for evaluating the efficacy of the aforementioned technical trading patterns. The second aim of this paper is measuring the predictive power of buy-signals generated by these technical patterns. Empirical results obtained from seven US tech stocks indicate that simple resistant levels outperform saucers patterns. Furthermore, positive statistical significant excess returns are being generated only in first sub-periods of examination. These returns decline or even vanish as the experiment proceeds to recent years. Our findings are aligned with the results reported by various former studies. The proposed identification mechanism can be used as a component of an expert system to assist academic community in evaluating trading strategies where technical patterns are embedded.     

Routine high-return human-competitive automated problem-solving by means of genetic programming

Genetic programming is a systematic method for getting computers to automatically solve problems. Genetic programming starts from a high-level statement of what needs to be done and automatically creates a computer program to solve the problem by means of a simulated evolutionary process. The paper demonstrates that genetic programming (1) now routinely delivers high-return human-competitive machine intelligence; (2) is an automated invention machine; (3) can automatically create a general solution to a problem in the form of a parameterized topology and (4) has delivered a progression of qualitatively more substantial results in synchrony with five approximately order-of-magnitude increases in the expenditure of computer time. These points are illustrated by a group of recent results involving the automatic synthesis of the topology and sizing of analog electrical circuits, the automatic synthesis of placement and routing of circuits, and the automatic synthesis of controllers as well as references to work involving the automatic synthesis of antennas, networks of chemical reactions (metabolic pathways), genetic networks, mathematical algorithms, and protein classifiers.     

A novel methodology for stock investment using high utility episode mining and genetic algorithm

In this paper, we present a novel methodology for stock investment using the technique of high utility episode mining and genetic algorithms. Our objective is to devise a profitable episode-based investment model to reveal hidden events that are associated with high utility in the stock market. The time series data of stock price and the derived technical indicators, including moving average, moving average convergence and divergence, random index and bias index, are used for the construction of episode events. We then employ the genetic algorithm for the simultaneous optimization on parameters and selection of subsets of models. The empirical results show that our proposed method significantly outperforms the state-of-the-art methods in terms of annualized returns of investment and precision. We also provide a set of Z-tests to statistically validate the effectiveness of our proposed method. Based upon the promising results obtained, we expect this novel methodology can advance the research in data mining for computational finance and provide an alternative to stock investment in practice.     

A gradient boosting decision tree approach for insider trading identification: An empirical model evaluation of China stock market

Insider trading is a kind of criminal behavior in stock market by using nonpublic information. In recent years, it has become the major illegal activity in China’s stock market. In this study, a combination approach of GBDT (Gradient Boosting Decision Tree) and DE (Differential Evolution) is proposed to identify insider trading activities by using data of relevant indicators. First, insider trading samples occurred from year 2007 to 2017 and corresponding non-insider trading samples are collected. Next, the proposed method is trained by the GBDT, and initial parameters of the GBDT are optimized by the DE. Finally, out-of-samples are classified by the trained GBDT–DE model and its performances are evaluated. The experiment results show that our proposed method performed the best for insider trading identification under time window length of ninety days, indicating the relevant indicators under 90-days time window length are relatively more useful. Additionally, under all three time window lengths, relative importance result shows that several indicators are consistently crucial for insider trading identification. Furthermore, the proposed approach significantly outperforms other benchmark methods, demonstrating that it could be applied as an intelligent system to improve identification accuracy and efficiency for insider trading regulation in China stock market.     

Breast cancer diagnosis using genetic programming generated feature

This paper proposes a novel method for breast cancer diagnosis using the feature generated by genetic programming (GP). We developed a new feature extraction measure (modified Fisher linear discriminant analysis (MFLDA)) to overcome the limitation of Fisher criterion. GP as an evolutionary mechanism provides a training structure to generate features. A modified Fisher criterion is developed to help GP optimize features that allow pattern vectors belonging to different categories to distribute compactly and disjoint regions. First, the MFLDA is experimentally compared with some classical feature extraction methods (principal component analysis, Fisher linear discriminant analysis, alternative Fisher linear discriminant analysis). Second, the feature generated by GP based on the modified Fisher criterion is compared with the features generated by GP using Fisher criterion and an alternative Fisher criterion in terms of the classification performance. The classification is carried out by a simple classifier (minimum distance classifier). Finally, the same feature generated by GP is compared with a original feature set as the inputs to multi-layer perceptrons and support vector machine. Results demonstrate the capability of this method to transform information from high-dimensional feature space into one-dimensional space and automatically discover the relationship among data, to improve classification accuracy.     

Interweaving genetic programming and genetic algorithm for structural and parametric optimization in adaptive platform product customization

An adaptive product platform offers high customizability for generating feasible product variants for customer requirements. Customization takes place not only to product platform structure but also to its relevant parameters. Structural and parametric optimization processes are interwoven with each other to achieve the total optimality. This paper presents an evolutionary method dealing with interwoven structural and parametric optimization of adaptive platform product customization. The method combines genetic programming and genetic algorithm for handling structural and parametric optimization, respectively. Efficient genetic representation and operation schemes are carefully adapted. While designing these schemes, features specific to structural and parameter customization are considered for the simplification of platform product management. The experimental results show that the performance of the proposed algorithm outperforms that of the tandem evolutionary algorithm in which a genetic algorithm for parametric optimization is totally nested in a genetic programming for structural optimization.     

GenTrust: A genetic trust management model for peer-to-peer systems

In recent years, peer-to-peer systems have attracted significant interest by offering diverse and easily accessible sharing environments to users. However, this flexibility of P2P systems introduces security vulnerabilities. Peers often interact with unknown or unfamiliar peers and become vulnerable to a wide variety of attacks. Therefore, having a robust trust management model is critical for such open environments in order to exclude unreliable peers from the system. In this study, a new trust model for peer-to-peer networks called GenTrust is proposed. GenTrust has evolved by using genetic programming. In this model, a peer calculates the trustworthiness of another peer based on the features extracted from past interactions and the recommendations. Since the proposed model does not rely on any central authority or global trust values, it suits the decentralized nature of P2P networks. Moreover, the experimental results show that the model is very effective against various attackers, namely individual, collaborative, and pseudospoofing attackers. An analysis on features is also carried out in order to explore their effects on the results. This is the first study which investigates the use of genetic programming on trust management.     

The structure of the genetic programming collaboration network

The genetic programming bibliography aims to be the most complete reference of papers on genetic programming. In addition to locating publications, it contains coauthor and coeditor relationships which have not previously been studied. These reveal some similarities and differences between our field and collaborative social networks in other scientific fields.

A Hybrid approach for integer programming combining genetic algorithms, linear programming and ordinal optimization

Hybrid methods are promising tools in integer programming, as they combine the best features of different methods in a complementary fashion. This paper presents such a framework, integrating the notions of genetic algorithm, linear programming, and ordinal optimization in an effort to shorten computation times for large and/or difficult integer programming problems. Capitalizing on the central idea of ordinal optimization and on the learning capability of genetic algorithms to quickly generate good feasible solutions, and then using linear programming to solve the problem that results from fixing the integer part of the solution, one may be able to obtain solutions that are close to optimal. Indeed ordinal optimization guarantees the quality of the solutions found. Numerical testing on a real-life complex scheduling problem demonstrates the effectiveness and efficiency of this approach.     

Trend predictions of tick-wise stock prices by means of technical indicators selected by genetic algorithm

We propose a systematic method for predicting the trend of the price time-series at several ticks ahead of the current price by means of a genetic algorithm, used to optimize the combination of the frequently used technical indicators such as various moving averages, the deviation indicator from the moving averages, and so on. We show that the proposed method gives good predictions on the directions of motion, with the rate as high as 80% for multiple stocks of NYSE selected from four different business types. We also show that the performance improves if we combine two or three indicators compared to the case of using a single indicator. However, the performance seems to go down as we increase the number of the indicators from the optimum value. This work was presented in part at the 12th International Symposium on Artificial Life and Robotics, Oita, Japan, January 25–27, 2007     

A multiple criteria decision for trading capacity between two semiconductor fabs

This paper presents a multiple criteria decision approach for trading weekly tool capacity between two semiconductor fabs. Due to the high-cost characteristics of tools, a semiconductor company with multiple fabs (factories) may weekly trade their tool capacities. That is, a lowly utilized workstation in one fab may sell capacity to its highly utilized counterpart in the other fab. Wu and Chang [Wu, M. C., & Chang, W. J. (2007). A short-term capacity trading method for semiconductor fabs with partnership. Expert Systems with Application, 33(2), 476–483] have proposed a method for making weekly trading decisions between two wafer fabs. Compared with no trading, their method could effectively increase the two fabs’ throughput for a longer period such as 8 weeks. However, their trading decision-making is based on a single criterion—number of weekly produced operations, which may still leave a space for improving. We therefore proposed a multiple criteria trading decision approach in order to further increase the two fabs’ throughput. The three decision criteria are: number of operations, number of layers, and number of wafers. This research developed a method to find an optimal weighting vector for the three criteria. The method firstly used NN + GA (neural network + genetic algorithm) to find an optimal trading decision in each week, and then used DOE + RSM (design of experiment + response surface method) to find an optimal weighting vector for a longer period, say 10 weeks. Experiments indicated that the multiple criteria approach indeed outperformed the previous method in terms the fabs’ long-term throughput.