Computing Conference 2017

18-20 July 2017 | London, UK

Surveying Various Genetic Programming (GP)

Approaches to Forecast Real-Time Trends & Prices in
the Stock Market
Balasaheb Gite Khalid Sayed Navin Mutha
Department of Computer Department of Computer Department of Computer
Engineering, Engineering Engineering
Sinhgad Academy of Engineering Sinhgad Academy of Engineering Sinhgad Academy of Engineering
(SAE) (SAE) (SAE)
Pune, India Pune, India Pune, India
bbgite.sae@sinhgad.edu khalidahmedsayed@gmail.com namutha0312@gmail.com

Saurabhkumar Marpadge Kshitij Patil

Department of Computer Engineering Department of Computer Engineering
Sinhgad Academy of Engineering (SAE) Sinhgad Academy of Engineering (SAE)
Pune, India Pune, India
saurabhmarpadge29@gmail.com kshitijpatil137@gmail.com

Abstract—The share prices in the stock market are known for
their extreme unpredictability and attempts to identify any
familiar patterns in the prices poses a confounding problem for
both fundamental & technical analysts. This article attempts to
use symbolic regression capabilities of GP and a market trend
indicator (RSI) to predict the price and trend of the particular
stock as accurately as possible. The use of a market indicator to
independently forecast the trend without any role of GP serves as
a verification mechanism to the price predicted by GP for the
next day to further validate the authenticity of the price of the
stock in the context of the real-time stock market. Extensive
testing has been done on the various evolution parameters and
functions of GP to customize the GP approach as much as
possible to suit the current application and optimize the results.
Though obtained results can never be fully relied on by real
technical analysts of the stock market, it could definitely be used
as a decision making support.
Keywords—Genetic Programming (GP); Relative Strength
Index (RSI); Stock price; Stock trend
I. INTRODUCTION
The Efficient Market Hypothesis states that it is not
possible to ‘say’ anything about the future of a particular stock
based on past data. Although the hypothesis is widely
accepted, mostly by the fundamental analyst community, it’s
opponents do believe that the past data does have some role in
shaping the trend or price in the future. Technical analysts,
who do extensive study on historical prices of a company to
forecast future market conditions, use a plethora of market
indicators and huge historical data coupled with data mining
techniques. The use of technical analysis, which isolates key
factors that may not be quantified, has been shown to still give
more than acceptable results [1].
Keeping in mind the arguments posed by both parties on
this bone of contention, this project attempts to use Genetic
Programming (GP) concepts along with a market indicator to
demonstrate a new methodology for a decision making
support. The regression properties of GP could act as a
‘mathematical’ prediction, free from any bias that a
fundamental analyst may have. Regression of this manner,
however accurate or novel it may be, could never be solely
depended upon. Thus, to mitigate this problem, a
psychological market indicator such as RSI is used in tandem
with GP to show the user that two methodologies are both
giving the same answer (in the form of price & trend).
Technical analysis comprises the amalgamation of various
market indicators, carefully assigning weights based on their
contribution to the desired output. Model building is tedious
and although the more effective features are given more
priority, usually more than one indicators are involved. In a
sense, diversions in the desired result may be obtained which
could have been avoided by using a single, much-improved
technical indicator. This paper attempts to showcase exactly
this – using only one popular indicator (RSI) and further
improving it using GP. Thus, the ‘opinion’ of the lone
indicator is not compromised by the involvement of other
indicators while at the same time it’s own accuracy is
improved.
II. LITERATURE SURVEY
GP has a large set of configuration parameters (evaluation
method, fitness weights, crossover and mutation probabilities)
which could be set beforehand to tailor it specifically for the
problem in hand (predicting the stock price for the next day)
to enhance the regression abilities of GP [2]. In this paper,
attempts have been made to get the right set of parameters.

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Technical indicators are widely used by technical analysts
as they take into account historical prices and trends. Here, the
Relative Strength Index (RSI) has been chosen as a
verification method because of less calculation overhead.
Additionally, RSI is an extremely popular momentum
indicator that has been featured in a number of articles,
interviews and books over the years, having stood the test of
time [3].
Most of the available literature on stock prediction
primarily considers many market indicators at the same time.
The training data for stocks (open, close, low, high, volume) is
usually transformed into market indicators by applying the
respective formulae. Multivariate Adaptive Regression Spline
(MARS), sometimes along with Stepwise Regression (SR) is
then applied to these indicators to filter out the promising ones.
The selected indicators are then used in a forecasting model,
mostly Support Vector Regression (SVR) to predict the price.
This is where GP enters the picture – as a proven methodology
to optimize certain parameters (such as C) of the SVR model
to obtain better forecasting effectiveness [4]. As can be
understood from the above mentioned method, it is the SVR
that is doing the forecasting – GP only serving as polishing the
input for forecasting models.
Market psychology indicators are ultimately quantified
into numerical values and this is where the mathematical
prediction capabilities of GP come into picture. Thus, in this
paper, the market trend (overbought or oversold) predicted by
RSI is corroborated with the increase or decrease in price
predicted by GP. Also, the GP approach that is used as a
verification to the trend predicted by RSI, is customized as
thoroughly as possible to suit this exact need.
III. WORKING OF GP
Based on the given problem statement, a set of initial
programs are randomly created – these programs will belong
to the first generation. If certain features of the final solution
are known or expected, those features could be included in the
initial population (referred to as seeding). This helps in
narrowing down the search for the possible solution.
Evaluate to Obtain the
Generate
identify best found
initial
the fitter solution
population
programs after some
of random
and breed stopping
programs
them criteria
Fig. 1. An overview of GP
Programs from the first generation will be tested by a
suitably selected fitness model to identify the ‘better’ ones.
The more fit a program, the higher the probability it has to be
included in breeding operations to reproduce the next
978-1-5090-5443-5/17/$31.00 ©2017 IEEE
Computing Conference 2017
18-20 July 2017 | London, UK
generation. The children programs will have inherited features
from their parents or in some uncommon instances, they might
be the mutated versions of their parents.
Thus, the repetitive reproduction goes on creating many
generations, with each program of a generation having unique
features. To stop GP, a terminating condition needs to be
specified – either a limit on the number of generations should
be fixed or the fitness (or error) is less than some value
(usually taken as 0.001).
A. Representation of Programs
In GP, the programs/expressions are represented in the
form of trees which makes it easier to see the relationships
between sub-expressions and sub-trees. The external nodes of
the trees are constants and variables (called terminals) while
the internal nodes are operators (called functions) of varying
arities.
B. Random Generation of Initial Population
Two simple approaches to this random generation are full
and grow methods. Another better approach is the ramped
half-and-half method proposed by Koza which uses the full
method to generate one half of the population and the grow
method to generate the second half of the population [5].
Since this is considered as the better growing method, the
code implements this approach.
In the full method, nodes of the trees are chosen only from
the function set till the depth limit is reached, after which the
external nodes are chosen only from the terminal set. In
contrast, the grow method creates more varied trees as all the
nodes of trees are chosen either from the function set or the
terminal set until the depth limit is reached.
C. Selection followed by Recombination and Mutation
A suitably selected fitness model decides the fitness values
of every program. Here, fitness indicates how close an
individual of a generation is close to the pursued solution.
After a generation is created, a selection tournament is
conducted where individuals are pitted against each other. The
ones with the higher fitness get an increased chance to
participate in the recombination/mutation process to give birth
to the next generation. However, care must be taken to keep
the selection pressure constant by ignoring the quantitative
value of ‘how much fitter’ is one individual than another. This
helps in maintaining the uniqueness of the available genetic
diversity.
The most popularly method used for recombination is sub-
tree crossover, where crossover points (randomly chosen
nodes) are selected from two individual trees and the sub-trees
at those points are combined together to form an altogether
new tree. This is analogous to the mating of two humans and
the birth of a child who inherits genes from his mother and
father.
Another novel, though sparingly used technique is
mutation where a mutation point (randomly chosen node) is
selected and a randomly generated sub-tree is attached to it.
Here, the child may be radically different from the single
parent that spawned it. Though mutation breaks the traditional
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norm of passing down the ‘good’ genes of individuals to
future generations, it has the benefit of increasing the diversity
of the genetic pool.
IV. WORKING
First and foremost, real-time stock data is needed. A
Python module has been used to extract 40 days’ worth of data
in the past which includes the open, close, low, high and
volume values of the stock. The module fetches this useful
data from Yahoo.
Secondly, the RSI is calculated over the past 40 days using
the formula which in turn gives us an indication to either buy
or sell the stock. The trend depends on the value of RSI –
whether it crosses the overbought band or the oversold band or
is a value between the bands. GP is also used on the previous
40 days’ data to come up with a function that would predict
the price on the next day. At each generation, the correctness
of an individual function’s output is checked against the
closing price of the stock on the next day. GP is done in
Python, relying on the Distributed Evolutionary Algorithms in
Python (DEAP) package.
Computing Conference 2017
18-20 July 2017 | London, UK
vastly differs from certain methods where GP is used as it is
on certain market indicators like Simple Moving Average [6].
If RSI forecasts a trend indicating the rise in the upcoming 40
days and if GP also indicates a rise in the close price of the
next day, it is said that RSI has been verified by GP. The same
goes for RSI depicting a falling trend and GP also depicting a
drop in price for the next day
Finally, the verified and unverified RSIs are then validated
against the actual rise or fall that happened in the stock market.
If RSI indicates either a rise or fall, GP shows a rise or fall and
in reality a rise or fall occurred respectively, it denotes a
success case. Similarly, if RSI predicted a rise and GP
predicted a fall and in reality a fall in price did happen, it
shows the success of the GP verification in disregarding the
RSI prediction.
V. OBSERVATIONS
The GP has been tailored as much as possible and RSI has
been verified against the many GP approaches, in order to get
the best parameters for the need.
For testing purposes, 16 stocks of tech-based companies
listed in NASDAQ have been considered and the graphs have
been plotted and documented in MS Excel. The data chosen
for input is real data, as recent as Sept. 16. Different
approaches indicate the different changes made in GP to serve
as better verification checks for RSI.

Approach 1
2

0
0 5 10 15 20

2 - Success 1 - Failure

Fig. 3. Approach 1 shows 11/16 success cases

Approach 2
2

0
0 5 10 15 20

Fig. 2. Flowchart depicting the methodology applied 2 - Success 1 - Failure

Thirdly, a verification check is done by GP on RSI. This Fig. 4. Approach 2 shows 10/16 success cases

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Approach 3
2 indicator (RSI) has been verified by GP. Although, a popular
1
0 accuracy in predicting the price of the next day. The accuracy
0 5 10 15
Success Failure
Fig. 5. Approach 3 shows 9/16 success cases
Only RSI
2 The approach used here bypasses the need for considering
1 increase calculation overhead but also requires many
0 (with the best GP approach) has a 18.75% improvement in
0 5 10 15
2 - Success 1 - Failure
Fig. 6. 6 RSI does not perform as well as verified RSI (only 8/16 success
cases)
As inferred from the obtained results, simply using RSI
gives an accuracy of only 50% while the various other GP
approaches for validation show an accuracy upwards of 60%.
The approaches differ from each other based on their
parameter values. The GP approach that offers the best
validation check is approach 1.
Fig. 7. Parameter values for various GP approaches
While testing the different approaches it was observed that
change in certain parameter values, such as fitness weights
had no effect at all on the performance. Increasing the
generation to a limit more than 400, results in a bottleneck –
showing no increase in accuracy.
The parameter values that resulted in the best approach
could be taken as guidelines for future work involving GP as a
verification mechanism for market indicators like RSI. The
best approach also shows that for the application of this paper
the tournament size should be kept high and the number of
generations when kept at the standard limit of 200, gives
optimum performance.
Computing Conference 2017
18-20 July 2017 | London, UK
VI. LIMITATIONS OF VERIFIED RSI
It is important to bear in mind that only one technical
indicator among traders for it’s depiction of market
psychology, it is only best suited for trend prediction. Existing
forecast models use many technical indicators as inputs which
are proven to cover many aspects of the market.
The customized GP approach used has a fine math
20 though is purely mathematical and as such does not have any
relation to other market indicators.
As regards to the test cases, there is definitely scope for
further improvement by considering various market indicators
which could perhaps give a clearer picture of the market,
provided their results are not conflicting.
VII. CONCLUSION
many technical indicators which need to be heavily discretized
before being sent to forecasting models. Not only does this
discretization algorithms to be used simultaneously [7].
As can be seen from the observations, the GP-verified RSI
20 performance over RSI applied without a GP check. This
shows a promising scope for further use of GP as a
verification mechanism for RSI as a much better decision-
making support. The project proposes that the success of GP
validation on RSI could be effectively replicated on various
other market indicators in a similar fashion to increase their
accuracy. Different market indicators could be amalgamated
to cover many aspects of the stock market and then have the
correctness obtained further improved by verifying it with GP.
Lastly and most importantly, the success of this approach
opens new vistas for the creation of better suited market
indicators [8].
REFERENCES
[1] E.Zhao, Z.Han, “Analyze Long & Mid-term Trends of Stock with
Genetic Programming on Moving Average and Turning Points,” IEEE,
2010
[2] V. Hlavac, “A program searching for a functional dependence using
genetic programming with coefficient adjustment,” Smart Cities
Symposium Prague,2016
[3] stockcharts.com/school/doku.php?id=chart_school:technical_indicators:r
elative_strength_index_rsi
[4] C.H.Cheng, H.Y.Shiu, “A novel GA-SVR time series model based on
selected indicators method for forecasting stock price,” IEEE, 2014
[5] R. Poli, W. B. Langdon, N. F. McPhee, “A Field Guide to Genetic
Programming,” pp. 11-14
[6] T.P.Nascimento, S.Labidi, P.B.Neto, N.Timbo, A.Almeida, “A System
Based on Genetic Algorithms as a Decision Making Support for the
Purchase and Sale of Assets at Sao Paulo Stock Exchange,” IEEE, 2015
[7] G.Wilson, W.Banzhaf, “Fast and Effective Predictability Filters for
Stock Price Series using Linear Genetic Programming,” WCCI 2010
IEEE World Congress on Computational Intelligence
[8] M.Khoza, T.Marwala, “A Rough Set Theory Based Predictive Model for
Stock Prices,” 12th IEEE International Symposium on Computational
Intelligence and Informatics, 2011

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