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AIML Synopsis

The document discusses creating a machine learning model to predict stock prices using historical stock price data. It will use a random forest classifier and focus on precision to minimize losses from incorrect price increase predictions. The model could help traders and financial institutions make better investment decisions.

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Rishabh Khetan
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69 views

AIML Synopsis

The document discusses creating a machine learning model to predict stock prices using historical stock price data. It will use a random forest classifier and focus on precision to minimize losses from incorrect price increase predictions. The model could help traders and financial institutions make better investment decisions.

Uploaded by

Rishabh Khetan
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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RV College of Engineering®, Bengaluru – 59

Department of Computer Science and Engineering


AI/ML Laboratory (18CS63)

Synopsis
Predicting stock price by creating a Machine Learning Model

TEAM 1RV19CS071 Rishabh Khetan

1RV19CS089 Mohamed Moin Irfan

1. Problem Domain

The financial market is a dynamic and composite system where people can buy and sell
currencies, stocks, equities and derivatives over virtual platforms supported by brokers.
Stock markets are affected by many factors causing the uncertainty and high volatility in the
market. Although humans can take orders and submit them to the market, automated trading
systems (ATS) that are operated by the implementation of computer programs can perform
better and with higher momentum in submitting orders than any human. Since most of the
dealings in the markets are done by automated systems, it has now been well established that
training the past data can help us in finding patterns in the movement of the markets which
can be used to predict the future prices. If implemented successfully with a higher accuracy
than existing systems, it could turn into a financial support system with minimal amount of
risk.

2. Potential for AI in the problem domain with industrial relevance


AI has a huge potential in the prediction of stock prices. Taking the past performance and
behavior of any stock and training the data available using neural networks and machine
learning models can help in understanding how a stock might behave in the future.
Industrially talking, the system would have huge relevance. It can be used by traders to gain
an edge over others and can also be used by financial institutions for quant-vol trading.

3.Statement of the problem

With the innovation in technology and their application in the stock market, the system
has become increasingly complex and volatile which in turn has made human
predictions highly inaccurate, but using Machine Learning to find out the patterns in
the system using historical data can help us predict the future prices more accurately.
4.Objectives

We want to maximize our true positives - days when the algorithm predicts that the price will
go up, and it actually goes up. Therefore, we'll be using precision as our error metric
for our algorithm, which is true positives / (false positives + true positives). This will
ensure that we minimize how much money we lose with false positives (days when we
buy the stock, but the price actually goes down). This means that we will have to accept
a lot of false negatives - days when we predict that the price will go down, but it
actually goes up. This is okay, since we'd rather minimize our potential losses than
maximize our potential gains.

5. Dataset Details

The dataset will be imported through kaggle easily. For training the model we would just
need prices of the required stocks over certain periods of time. The parameters that the
data will be trained on are OHLC ( open, high, low, close) and some additional
parameters(indicators) to achieve even higher accuracy that will comprise the innovative
component of the proposed system.

6. Methodology

We will be using a Random Forest Classification algorithm as the dataset that we train is
completely discrete and we will be using several indicators to calculate the data on which
the training will be performed.

7. Expected Outcome
We aim to create a Machine Learning model to predict the future movements in the prices
of stocks. This will help us in gaining an edge over the traditional investors and can lead to
monetary advantages.

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