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Ensemble Classifier for Stock Trading

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Chukiat Worasucheep

To cite this article: Chukiat Worasucheep (2022) Ensemble Classifier for Stock
Trading Recommendation, Applied Artificial Intelligence, 36:1, 2001178, DOI:
10.1080/08839514.2021.2001178

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APPLIED ARTIFICIAL INTELLIGENCE
2022, VOL. 36, NO. 1, e2001178 (257 pages)
https://doi.org/10.1080/08839514.2021.2001178

Ensemble Classifier for Stock Trading Recommendation

Chukiat Worasucheep
Applied Computer Science Program, Department of Mathematics, King Mongkut’s University of
Technology Thonburi, Bangkok, Thailand

ABSTRACT ARTICLE HISTORY

This paper presents a heterogeneous ensemble classifier for price Received 18 July 2021
trend prediction of a stock, in which the prediction results are Revised 25 October 2021
subsequently used in trading recommendation. The proposed Accepted 28 October 2021
ensemble model is based on Support vector machine, Artificial
neural networks, Random forest, Extreme gradient boosting, and
Light gradient boosting machine. A feature selection is per­
formed to choose an optimal set of 45 technical indicators as
input attributes of the model. Each base classifier is executed with
an extensive hyperparameter tuning to improve performance.
The prediction results from five base classifiers are aggregated
through a modified majority voting among three classifiers with
the highest accuracies, to obtain final prediction result. The per­
formance of proposed ensemble classifier is evaluated using daily
historical prices of 20 stocks from Stock Exchange of Thailand,
with 3 overlapping datasets of 5-year intervals during 2014–2020
for different market conditions. The experimental results show
that the proposed ensemble classifier clearly outperforms buy-
and-hold strategy, individual base classifiers, and the ensemble
with straightforward majority voting in terms of both trading
return and Sharpe ratio.

Introduction
Stock trend prediction is very valuable for investment management. Accurate
prediction makes it possible for investors to decide a proper moment to buy or
sell a stock, to achieve the goal to beat the market and make profits (Ding and
Qin 2020). However, stock trend prediction is really challenging due to the
high volatility in the stock market. The trend prediction in stock market has
drawn a lot of research attention for many decades using both statistical and
computing approaches including artificial intelligence. Recent approaches
focus more on machine learning with both regression and classification
techniques. Regression techniques aim to predict the future value of the
stock price (Wang et al. 2011), while classification techniques aim to predict
the trend of stock price movement (Deng et al. 2021; Kim and Han 2016;
Nobre and Neves 2019; Olson and Mossman 2003; Zhang et al. 2018, 2021).

CONTACT Chukiat Worasucheep [email protected] Applied Computer Science Program, Department

of Mathematics, King Mongkut’s University of Technology Thonburi, 126 Pracha-utid Rd., Tungkru, Bangkok, 10140,
Thailand
© 2021 The Author(s). Published with license by Taylor & Francis Group, LLC.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/
licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly
cited.
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-227

Broadly speaking, there are two approaches in analyzing financial market:

fundamental analysis and technical analysis. Fundamental analysis studies the
economic factors and financial factors of the firm to predict its price or trend.
Technical analysis approach believes that the historical data of the firm’s prices
can be mathematically analyzed for predicting the trend. Technical analysis
has been widely used for short-term trading, in a range of weeks to hours (Hu
et al. 2015; Lorenzo 2013).
This work aims to apply five well-known classification algorithms, namely,
support vector machine, artificial neural network, random forest, extreme
gradient boosting (or XGBoost), and light gradient boosting machine (or
LightGBM) for trend prediction. The aim is to propose a heterogeneous
ensemble classifier from such five base algorithms to predict trend of stock
price for trading recommendation. Performance of the algorithms will be
evaluated with the investment returns and risks from trading simulation
using the predicted trend results.
Specifically, in the first step, the classifiers are trained to build a trend
prediction model from a daily dataset. The experiment uses publicly avail­
able data of open, high, low, close, and volume of stock prices. These raw
data are used to compute a set of technical indicators which are widely used
by technical analysts. The computed technical indicators are fed into the
process of building the prediction models. However, up to now, there is no
known set of technical indicators most suitable for a dataset. A feature (or
attribute) selection method is adopted in the data preprocessing to auto­
matically choose the optimal technical indicators as model inputs. The
models are used for predicting daily trends of the corresponding testing
(or unseen) data, which will further be used for trading simulation in
the second step. Moreover, choosing the optimal classification algorithm
and its hyperparameter for a given data often requires expertise and
amount of effort (Elshawi, Maher, and Sakr 2019). Hyperparameters are
parameters of the algorithm itself that need to be set to suitable values to
obtain good performance for a given data. Most of the time they are left to
using default values, which unfortunately often lead to performance much
lower than of the hyperparameter tuning. Thus in this work, performance
and optimum parameters for a given algorithm are explored by using grid
search method.
Most works on classification algorithm usually compare the performance
with common classification metrics such as accuracy. However, there are
usually inconsistencies between model’s performance and profitability.
Classification metrics like accuracy do not take into account the profit
information. The model with optimal metric value cannot guarantee the
optimal profitability (Guang and Wang 2019; Teixeira and De Oliveira
2010). Therefore, an ensemble method is used to aggregate the results from
base classifiers to arrive at a collaborated decision (Tsai et al. 2011).
e2001178-228 C. WORASUCHEEP

In the second step, the predicted trend results are employed in a trading
recommendation system – that is to buy, to sell, or to do nothing if the
predicted trend is positive, negative, or very small, respectively. The invest­
ment returns from trading simulation with the testing data are calculated.
Performance of the proposed model is evaluated using trading return and
Sharpe ratio. Sharpe ratio is a measure of risk-adjusted return, describing how
much excess return received for the volatility (or risk) of holding a riskier asset
(Sharpe 1994). The returns and Sharpe ratios are to be compared with the
trading using prediction results from individual classifier as well as with two
other cases – one is the buy and hold (B&H) and the other is if we know the
future (KF).
This research contributes to (1) construct a heterogeneous ensemble classi­
fier that aggregates results from different base classifiers, each of which using
an extensive hyperparameter tuning. Inputs of each base classifier are various
commonly used technical indicators automatically chosen with a feature selec­
tion method. In addition, we also (2) propose a trading recommendation
system based on the trend prediction result from the ensemble classifier.
The remaining of this article is organized as following. The next section
reviews related literature about technical analysis and financial trend predic­
tion using classification algorithms. Then the proposed ensemble classifier will
be described, and its performance is evaluated and discussed. Finally, the last
section concludes this work with its limitations and future works.

Related Works
Technical Analysis and Indicators

In financial markets, technical analysis develops technical indicators and

several charts from historical prices and uses them to predict trends or provide
trading signals (Hu et al. 2015; Lorenzo 2013). There are hundreds of technical
indicators developed for the past decades, but the most popular ones are
limited to fewer than 20 of them. Technical indicators can be classified into
four types – trend, momentum, volume, and volatility (Hu et al. 2015). First,
trend indicators tell us which direction the price is moving in, upward, down­
ward, or sideway – there is no trend. Simple Moving Average (SMA) and
Exponential Moving Average (EMA) are the most popular examples of trend
indicators. Second, momentum indicators evaluate the velocity of price change
and judge whether a reversal is about to happen. Common momentum
indicators are Moving Average Convergence Divergence (MACD),
Stochastic Oscillator (%K and %D), and Relative Strength Index (RSI).
Third, volume indicators measure the strength of a trend or confirm
a trading direction based on some form of averaged volume traded.
A popular volume indicator is On Balance Volume (OBV). Fourth, volatility
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-229

indicator measures the range of price movement and can be used to identify
level of support and resistance. Common volatility indicator includes Bollinger
Band (BB) (Hu et al. 2015; Lorenzo 2013).

Trend Prediction with Classification Techniques

Classification algorithms try to classify data into a given number of classes.
Classification algorithms can be employed straightforwardly for prediction of
the trend or direction of stock returns into positive or negative, for example.
During the past two decades, the widely used classification algorithms with
proved performance are support vector machine, artificial neural networks,
and random forest. More recently, tree-ensembled methods have significantly
improved performance and are increasingly accepted as state-of-the-art.
Among them are extreme gradient boosting (or XGBoost) and light gradient
boosting machine (or LightGBM).
Support vector machine (SVM) is a statistical learning technique that
constructs a hyperplane as the decision surface that maximized the margin
of separation of different classes (Cortes and Vapnik 1995). Given a set of
training examples (xi,yi), i = 1, 2, . . ., l. Where xi ∈ Rn and yi ∈{-1, 1} is the
label of xi, a standard SVM model is formulated as min 12 w2 s.t. yi (<w, xi> +b)
w;b
≥ 1, i = 1, 2, . . ., l; where w is the normal vector of hyperplane, b is a bias value,
and <p, q> is the inner product of vectors p and q. The goal of SVM to
maximize the margin of separation of different classes is to minimize w2 =2.
SVM is one of the early successful algorithms for trend prediction. Huang,
Nakamori, and Wang (2005) investigated the predictability of weekly move­
ment direction of NIKKEI 225 index with SVM. Their experiment results
showed SVM outperformed Linear Discriminant Analysis, Quadratic
Discriminant Analysis and Elman Backpropagation Neural Networks. Ni,
Ni, and Gao (2011) proposed an SVM model with fractal feature selection of
19 technical indicators and a grid search method using fivefold cross valida­
tion to predict direction of Shanghai stock index. Luo et al. (2017) improved
their integrated piecewise linear representation and weighted support vector
machine (PLR-WSVM) for trading 20 China stock. Their SVM model with
relative technical indicators and automatic threshold has improved perfor­
mance in classification of turning points and ordinary points for making more
profitable trading decision.
Artificial Neural Network (ANN) is biologically inspired computing models
which can be used to find knowledge, patterns, or models from a large amount
of data (Bose and Liang 1996). ANN consists of connected computational
units or nodes, called neurons, arranged in several layers. Each neuron com­
bines its inputs, each of which is multiplied with a weight, and then passes it
through an activation function, which can be a linear or nonlinear filter (such
e2001178-230 C. WORASUCHEEP

as sigmoid or tanh functions). Then the neuron sends its output to other
neurons or to be output of the network. The interconnection of all neurons
forms different types of architectures designed for various functions. The most
widely used architecture is called feed-forward multilayer perceptron (MLP)
which generally used back-propagation (BP) learning algorithm to adjust its
weights for supervised learning. BP works in an iteration of three steps. The
first step is propagating inputs forward through the hidden layers to the output
nodes. The second step is to propagate the errors backward through the
network starting from output layer. And the final step is to update the weight
and biases using approximate steepest descent rule. Such three steps repeat
until reaching the maximum iterations allowed with the aim to minimize the
errors of output during the training.
ANN has demonstrated promising results in predictions of stock price
trends during the past two decades. Olson and Mossman (2003) compared
the forecasts of one-year-ahead Canadian stock returns using ANN, logistic
regression and ordinary least squares. The results demonstrated that ANN
outperformed the other two algorithms. O’Connor and Madden (2006)
included some external indicators, such as currency exchange rates, in pre­
dicting movements in the Dow Jones Industrial Average index using ANN
models. Kara, Boyacioglu, and Baykan (2011) predicted the direction of stock
price movement in the Istanbul Stock Exchange using ANN and SVM with ten
technical indicators as inputs. The empirical results demonstrated that their
ANN model performed better than SVM model. Chen, Leung, and Daouk
(2003) applied probabilistic neural network to predict the direction of return
on Taiwan Stock Exchange and found that their model demonstrated a more
predictive power than generalized methods of moments with Kalman filter
and random walk.
Random forest (RF) is an efficient learning algorithm for classification that
is constructed from many unpruned decision trees (DT) from random
subsets of features using bootstrapped training data (Breiman 2001). The
accuracy (or probability of correct prediction) of a single tree may not be
high, but the combination of many trees, forming the forest, results in
a higher accuracy. Construction of RF mainly includes two stages. The first
stage is the generation of forest, in which the training samples are divided
into many samples at random, construct CART (Classification and
Regression Tree) decision trees. When creating partitions to a feature, the
goodness of a partition is measured by purity. If a partition is pure, for each
sub-branch of this node, its instances belong to the same class (Zhang et al.
2018). The second stage is to determine the classification results from the
forest. For a classification task, the result combination can be as simple as
majority voting (Breiman 2001). This ensemble method enhances the accu­
racy of RF over the single DT, while the problem of overfitting is controlled
simultaneously.
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-231

Zhang et al. (2018) proposed a model using random forests, imbalance

learning, feature selection and clipping for prediction of both stock price
movement and its interval of growth (or decline) rate. Using more than 70
technical indicators as inputs, the model classified prediction targets into 4
classes: up, down, flat, and unknown. The model was evaluated using more
than 400 stocks in Shenzhen Market and the results revealed that it outper­
forms ANN, SVM and K-Nearest Neighbors in terms of accuracy and return
per trade. Thakur and Kumar (2018) applied RF to discover the optimal
feature subset from a large set of technical indicators from daily data of five
index futures for trading. Kim and Han (2016) predicted the direction of
movement of stock index using a modified random forest where bootstrap
also determined the weights based on the degree of Korea composite stock
index change. The experimental results confirmed that their enhanced ran­
dom forest outperformed the classical random forest with statistical
significance.
XGBoost (eXtreme Gradient Boosting) is an efficient ensemble machine
learning system, developed by Chen and Guestrin in 2016 (Chen and Guestrin
2016). XGBoost improves Friedman’s gradient boosting technique (Friedman
2001) that employs DT as base learners to fit the training data and use a tree
ensemble model to sum the score of each tree to get the final prediction. The
objective function of the XGBoost is to combine the standard penalty term
with the loss function term to obtain the optimal solution. XGBoost uses
regularization to control the flexibility of the learning task and to obtain
models that generalize better to unseen data. In addition, its loss function is
optimized by second-order Taylor expansion to help avoid overfitting.
Due to its efficiency and fast operation, XGBoost has been widely applied in
financial applications. For example, Nobre and Neves (2019) applied XGBoost
for binary classifier for predicting trend of five different financial time series
for trading simulation. Hyperparameters of their XGBoost are optimized with
multiobjective genetic algorithm. The empirical results showed that their
system can outperform the Buy and Hold (B&H) strategy in three of the five
analyzed financial markets. Chen et al. (2021) proposed a novel portfolio
construction approach based on XGBoost for stock price prediction.
Hyperparameters of XGBoost are optimized using an improved firefly algo­
rithm. Their experiment demonstrated that this approach yielded the best
results in terms of returns and risks. Deng et al. (2021) proposed a novel
hybrid method of XGBoost with bagging and regrouping particle swarm
optimization (RPSO) for direction forecasting of a high-frequency future
trading simulation. A bagging method is incorporated to solve overfitting
problem while the RPSO is for optimizing hyperparameters of XGBoost.
The empirical results reveal that their hybrid model outperforms SVM, RF
and buy-and-hold with many evaluation criteria. Yun, Yoon, and Won (2021)
proposed a hybrid model of XGBoost and genetic algorithm with an extensive
e2001178-232 C. WORASUCHEEP

feature engineering process on more than 60 technical indicators for stock

market predictions. Their hybrid model can outperform LSTM models in
terms of both performance and interpretability.
LightGBM is also a gradient learning tree-based framework with boosting
technique to integrate results from weak learners to enhance performance (Ke,
Menget al. 2017). Its main difference from the XGBoost model is that it uses
Gradient-based One Side Sampling (GOSS) and automated feature selection
with Exclusive Feature Bundling (EFB). With GOSS, LightGBM uses histo­
gram algorithm to discretize continuous floating-point eigenvalues into many
bins. Histogram algorithm does not need extra storage of presorted results and
thus greatly reduces memory consumption without scarifying the accuracy of
the model. EFB reduces the optimal bundling of exclusive features to a graph
coloring problem and solves it by a greedy algorithm with a constant approx­
imation ratio. Both GOSS and EFB makes LightGBM lighter and efficient. In
addition, LightGBM uses leaf-wise tree growth strategy, which effectively finds
the leaves with the highest branching gain each time from all the leaves, and
then goes through the branching cycle. Therefore, it can reduce more errors
and obtain better precision with the same number of times of segmentation.
A maximum depth limit is set to prevent overfitting while ensuring high
efficiency.
With high prediction accuracy, fast computational speed and preventing of
overfitting, LightGBM has been widely applied in many fields. Zhang et al.
recently propose a smart contract Ponzi scheme identification method based
on the improved LightGBM algorithm (Zhang et al. 2021). Experiments are
conducted on the real Ethereum data set which is imbalanced. The results
prove that their proposed method has highly improved accuracy, F-score and
the area under the receiver operating characteristics curve (AUC) metrics
compared with XGBoost and RF. Slezak, Butler, and Akbilgic (2021) preo­
peratively predict risk of postoperative readmission for total joint replacement
surgery among older persons. The dataset has 22 predictor variables and is
highly imbalance. The experimental results indicate that LGBM outperforms
XGboost, RF, and Logistic Regression using AUC obtained in the holdout
data. Oram et al. (2021) proposed a LGBM-based phishing e-mail detection
model using phisher websites’ features of mimic URLs. Their experimental
result show that LGBM outperforms XGBoost, AdaBoost, RF, and many other
classical classification algorithms in terms of accuracy and F1 score.

Issues Related to Classification

Unfortunately, using machine learning algorithms is not an easy task.
There are three common issues for thorough considerations: (i) feature
selection, (ii) hyperparameter tuning, and (iii) no free lunch theorem and
ensemble.
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-233

Feature Selection
First, one major question is how to choose a proper set of attributes, called
features, to be inputs of the model. Feature selection methods become an
important step of data preprocessing for the classification algorithm. Feature
selection approaches fall into three categories: filter based, wrapper based, and
embedded (Li et al. 2018; Xue et al. 2016).

(1) Filter-based methods uses statistical data dependency techniques to find

the subset of features.
(2) Wrapper-based methods evaluate candidate subsets by a learning algo­
rithm and thus itself requires parameter tuning.
(3) Embedded methods incorporate knowledge about the specific structure
of the algorithm while selecting features in the training process (Cai
et al. 2018). Thus, they are generally applicable to only specific classifi­
cation algorithms (Nguyen, Xue, and Zhang 2020).

Both wrapper-based and embedded methods are computing intensive. The

filter-based approach is usually considered efficient in most cases since it does
not involve any learning process, and is chosen for use in this work.

Hyperparameter Tuning
Second, building an effective classification model is a complex and time-
consuming process that involves tuning its hyperparameters (Nguyen, Xue,
and Zhang 2020; Yang and Shami 2020). Tuning hyperparameters is consid­
ered a key component of building an effective machine learning model,
especially for tree-based or neural-based models like RF and ANN, which
have many hyperparameters. Accurate results for ANN highly depend on
a careful selection of its hyperparameters such as number of hidden layers,
number of nodes in each layer the learning rate, input variables, etc. (Hussain
et al. 2008). Unfortunately, manual tuning of hyperparameters not only
requires expertise but also is prone to getting lower performance.
Grid search is one of the most commonly used methods to explore hyper­
parameter configuration space. It involves exhaustively search that evaluates
all the hyperparameter combinations given to a grid of configurations
(Nguyen, Xue, and Zhang 2020; Yang and Shami 2020). In this work, we use
grid search for hyperparameter tuning of all selected classification algorithms
for an optimal performance. Although this approach is time consuming, this
work does not aim to run in a real-time environment.

No Free Lunch Theorem and Ensemble

Third, there are several algorithms available for a given problem class and
there is no definite guideline to select the algorithm best fit the problem.
According to well-known No Free Lunch theorem (Wolpert and Macready
e2001178-234 C. WORASUCHEEP

1997), no single method may outperform others in all situations.

Classification algorithms are not exceptions. No one can foretell which
algorithm will outperform in all tested datasets. Ensemble learning is an
approach to overcome this challenge by combining multiple classifiers,
forming committee to improve prediction, and is believed to perform better
than single classifiers. Ensemble techniques have been applied in several
application domains including energy and financial prediction, which can
be briefly reviewed as following.
Khairalla et al. (2018) proposed a stacking multilearning ensemble model
with support vector regression, ANN, and linear regression, for prediction of
oil consumption. The experimental results demonstrated that their ensemble
model outperforms classical models for both 1-ahead and 10-ahead horizon
prediction, in terms of error rate, similarity, and directional accuracy. Nti,
Adekoya, and Weyori (2020a) performed an extensive comparative analysis
of different ensemble methods such as bagging, boosting, stacking, and
blending for stock market prediction. They constructed 25 different ensem­
ble regressors and classifiers using DT, MLP, and SVM for stock indexes
from four countries. The obtained result revealed that the stacking technique
outperformed boosting, bagging, blending, and simple maximum in stock
market prediction. Nti, Adekoya, and Weyori (2020b) proposed
a homogeneous ensemble classifier based on Genetic Algorithm for feature-
selection and optimization of SVM parameters for predicting 10-day-ahead
price movement on the Ghana stock exchange. They employed a simple
majority voting ensemble method to combine results from 15 different SVM
models using 14 technical indicators as inputs. Their empirical results
showed that their ensemble model provided a higher prediction accuracy
of stock price movement as compared with DT, RF, and NN. Ampomah,
Qin, and Nyame (2020) compared the effectiveness of different tree-based
ensemble models including RF, XGBoost, Bagging Classifier, AdaBoost,
Extra Trees Classifier, and Voting Classifier in forecasting the direction of
stock price movement. Eight different stock data from three stock exchanges
(NYSE, NASDAQ, and NSE) were used for the study. They employed
principal component analysis to do feature selection of 45 inputs including
40 technical indicators. The empirical results revealed that Extra Trees
classifier outperformed the other models in all the rankings.
In general, ensemble methods can be divided into homogeneous and
heterogeneous approaches (Polikar 2006). In homogeneous ensemble, all
base classifiers are from the same family (e.g. tree-based), whereas in hetero­
geneous ensemble, we construct the ensemble model from the classifiers
having different learning strategies. The heterogeneous classifier ensembles
offer slightly better performance than the homogeneous ones (Tsai et al. 2011).
The common ensemble strategies are majority voting, bagging (Breiman 1996)
and boosting (Breiman 2001). However, it might be inconclusive to identify
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-235

which strategy clearly outperforms the others. This work employs an ensemble
classification model that works on the modified majority voting of results of
five classifiers.

The Proposed Model

This work proposes an ensemble classifier built from SVM, RF, ANN, XGBoost,
and LightGBM to develop trend prediction models for stock prices. The trend
prediction results will be used to recommend trading decisions (to long, to short,
or to do nothing) in a trading simulation using the testing data. The returns
obtained from the simulation will be compared. This work is developed using
Python 3.8 platform on Windows 10 and 16-core Intel Core i9 processor
running 2.50 GHz. The whole process of trend classification for trading is
shown in Figure 1. It includes five stages of process including data collection
and preparation, feature selection, base classification, ensemble with majority
voting approach, and trading simulation as explained below.

Data Collection and Preparation

The prediction in this work is based on technical analysis approach. Inputs to the
process are daily open, high, low, close and volume data downloaded from web
finance.yahoo.com. The input data are used for computing 45 technical indicators

Figure 1. Process.
e2001178-236 C. WORASUCHEEP

Table 1. Technical indicators used.

Number of
Indicator Description indicator(s)
RSI10, RSI15, RSI20, RSI25 Relative Strength Index (10, 15, 20, and 25 days) 4
SLOWK, SLOWD Stochastic Oscillators (%K, %D) 2
ADX10, ADX20 Average Directional Movement Index (10-day and 20-day) 2
BBAND10, BBAND20, BBAND30 Bollinger Band (10-day, 20-day, 30-day) 3
DISP1, DISP2, DISP5, DISP10, Disparity n = 1, 2, 5, 10, 20, 50, 100 days 7
DISP20, DISP50, DISP100
AROONOSC Aroon Oscillator (14-day) 1
CCI14, CCI28 Commodity Channel Index (14-day and 28-day) 2
CMO14 Chande Momentum Oscillator (14-day) 1
DMI14 Directional Movement Index (14-day) 1
MACD(12, 26) Moving Average Convergence and Divergence 3
MFI10, MFI14, MFI20 Money Flow Index (10-day, 14-day, 20-day) 3
PPO12:26, PPO9:20 Percentage Price Oscillator (12–26-day, 9–20-day) 2
ROC5, ROC10, ROC20, ROC40, Rate of Change (5-day, 10-day, 20-day, 40-day, 80-day) 5
ROC80
TRIX30 Triple Smooth EMA (30-day) 1
WILLR10, WILLR15, WILLR20 William %R (10-day, 15-day, 20-day) 3
ADOSC(3, 10) Accumulation/Distribution Oscillator (3–10-day) 1
OBV On Balance Volume 1
NATR10, NATR15, NATR20 Normalized Average True Range (10-day, 15-day, 20-day) 3

listed in Table 1. All these indicators, forming attribute, or feature set of the
classifiers, are commonly used by the technical practitioners in stock markets.
Their descriptions and formulas can be found in Hu et al. (2015) and Lorenzo
(2013). Some of them e.g. RSI, DISP, and ROC use varying periods to deal with
uncertainty. Then every feature is normalized to range [0, 1] before further
processing.

Feature Selection

However, some features might be redundant features providing similar infor­

mation for the learning task while others might be irrelevant providing mis­
leading information that deteriorates the learning performance. A filter-based
approach feature selection is chosen in this work to remove redundant or
irrelevant features. The filter-based methods evaluate feature subsets using
their intrinsic properties (Xue et al. 2016) such as correlation, information,
distance, etc. In this work, we use a univariate filter-based method that
removes all but the highest Chi-square scoring features.

Base Classification
The model aims to predict the trend of closing price at day d + 2 (closed + 2)
compared to the opening price on the next day d + 1 (opend + 1). Specifically,
output of the model, called classd ∈{-1, 0, 1}, represents direction of δd or
percentage change of day d as of the following equation:
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-237

Figure 2. Determining classd from δd.

closedþ2 opendþ1
δd ¼ 100 (1)
opendþ1

where closed and opend are the closing price and opening price of day d. The
value of classd is determined by comparing δd with a decision threshold θ as in
Figure 2. That is classd is 0 if the percentage change δd is between -θ and θ.
Otherwise classd will be −1 or 1 if δd is less than -θ or greater than θ
respectively. The sign of the class value indicates short-term direction, i.e.
positive is uptrend and negative is downtrend. Class 0 implies that the change
is so small that the potential profit is difficult to beat transaction fee.

Hyperparameter Tuning
As discussed in previous section, performance of any classifiers highly depends
on its hyperparameter setting. Grid search method is employed in this work to
explore hyperparameter configuration space. It exhaustively evaluates all the
hyperparameter combinations (Yang and Shami 2020) of all five base classi­
fiers as following.
SVM
kernel [‘rbf,’ ‘poly’]
C [0.01, 0.1, 1, 10, 100]
gamma [1, 0.1, 0.01, 0.001]
ANN
solver [‘adam,’ ‘sgd’]
activation [‘tanh,’ ‘relu’]
learning_rate [‘invscaling,’ ‘adaptive’]
learning_rate_init [0.01, 0.001]
hidden_layer_sizes [(20,), (40,), (60,), (40, 40)]
RF
criterion [‘gini,’ ‘entropy’]
n_estimators [100, 400]
max_depth [5, 9, 13]
min_samples_split [2, 6]min_samples_leaf [1, 5]
XGBoost
max_depth [4, 8]
learning_rate [0.0005, 0.01]gamma [0.1, 1.0]
subsample [1.0, 0.7]
e2001178-238 C. WORASUCHEEP

min_child_weight [0.02, 1, 5.]

LightGBM
max_depth [5, 10, 15]
learning_rate [0.005, 0.05]num_leaves [20, 40, 60]
max_bin [100, 200, 300]
Performance of SVM depends upon the selected kernel function, regulariza­
tion parameter C, and gamma. The kernel function defines the hyperplane used
for separating data into different classes. Regularization parameter controls the
trades off between error minimization and margin maximization. The para­
meter gamma specifies the desired curvature for the radial basis function kernel.
Performance and complexity of an ANN mainly depend upon the number of
hidden layers and the number of nodes in each layer. We choose three different
number of nodes for one hidden-layer configuration plus a two-hidden-layer
configuration for grid search to explore. In addition, we choose two solvers for
weight optimization: a classical stochastic gradient descent (sgd) and Adam, an
improved stochastic gradient optimizer (adam). Different combinations of
learning rate and its adaptation are also varied in the experiment.
For RF, two probably most important hyperparameters are depth of each
tree and the number of trees in the forest for taking a vote. A better perfor­
mance can be expected from a higher number of trees with the cost of
computing time. A deeper tree may capture more information about the
data but is prone to overfitting and fail to generalize the findings for new
data. Two splitting criteria are chosen here for the RF, i.e. Gini impurity index
and entropy. The Gini index measures impurity of a node, while entropy, or
information gain, is the difference between uncertainty of the starting node
and weighted impurity of the child nodes.
Performance of the XGBoost (called XGB from now on) depends on several
hyperparameters. Like RF, deeper trees (high maximum depth) can model
more complex relationships by adding more nodes to learn from specific
training samples but is prone to overfitting. Parameter min_child_weight
allows the algorithm to create children that correspond to fewer samples,
thus allowing for more complex trees, but again, more likely to overfit. The
eta (or learning rate) is shrinkage of the weights associated to features after
each round. The lower value of eta is better but again is time consuming and
prone to overfitting. Parameter subsample denotes the fraction of observations
to be randomly samples for each tree. Lower values make the learning more
conservative and prevents overfitting but too small values might lead to
underfitting. Parameter gamma specifies the minimum loss reduction required
to make a split, and its values highly depends on the loss function.
For LightGBM (called LGB from now on), we choose four hyperparameters
that most impact performance of LGB. Parameters max_depth and learnin­
g_rate control the complexity and the accuracy the model like in XGB.
Parameter num_leaves controls the number of decision leaves in a single
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-239

tree. Parameter max_bin controls the maximum number of bins that features
will bucketed into. Large values of num_leaves and max_bin increase accuracy
of the training set but also are prone to overfitting.

Result Ensemble
The proposed model in this work employs five base classifiers, namely SVM,
ANN, RF, XGB, and LGB. Each of which runs independently using the same
input data of the selected features. However, the trend prediction results from
base classifiers might be different. Therefore, they are further aggregated using
a modified majority voting for a final trend prediction for the proposed
ensemble model. Since there are five base classifiers, we propose two following
ensemble methods for comparison:

(1) For each stock prediction, two base classifiers with the lowest accuracy
values are ignored. Then the prediction results of remaining three classi­
fiers are considered with a majority voting scheme summarized in Table 2.
Last three rows are for the cases that results of all three base classifiers are
mutually different; then the final results will be from the one with highest
accuracy value. Let us call algorithm using this ensemble scheme as T3.
(2) A straightforward majority voting. If there is a tie (e.g. [1, 1, −1, −1,
and 0]), the result will come from the classifier pair with a greater sum of
accuracy values. Let us call algorithm using this ensemble scheme as E5.

Trading Recommendation
After the ensemble of prediction results, all predicted classd values are employed
in the recommendation of trading one stock as in Figure 3. That is if classd = 0,
then do nothing in response to the uncertainty in direction of price change. If
classd = 1, then take a long position (or buy) of the stock with a proportion ρ of
the current available cash. If classd = – 1, then take a short position (or sell) of
the stock for a proportion ρ of the current amount of in-hand stock.

Table 2. Final decision of trend prediction results.

Classifier 1 Classifier 2 Classifier 3 Ensemble T3
−1 −1 Any −1
−1 Any −1 −1
Any −1 −1 −1
0 0 Any 0
0 Any 0 0
Any 0 0 0
1 1 Any 1
1 Any 1 1
Any 1 1 1
−1 0 1 Prediction result from the base classifier with highest accuracy
0 1 −1
1 −1 0
e2001178-240 C. WORASUCHEEP

Figure 3. Trading recommendation based on classd.

Parameters ρ represents proportion of number of stocks for selling (or short)

or amount of cash for buying (long) stocks on the day, thus ρ ∈ (0, 1]. The value
of ρ helps control the risk of investment; the lower value of ρ, the more risk
averse the investor takes by buying a smaller portion of the current cash and
selling a smaller portion of in-hands stocks.
All buying and selling transactions are subjected to transaction fees of rate f.
This means that when buying n stocks at price p, we have to pay for n × p ×
(1 + f). When selling n stocks at price p, our cash will increase only n × p × (1 –
f). The trading recommendation and simulation can be summarized as algo­
rithm in Figure 4. The trading decision threshold θ should be greater than the
fee rate f to avoid loss from the excessive transaction fee. Note that the proposed
algorithm is to be run at the end of day d, and buying or selling transactions as
recommended are at the opening price on the next day (opend+1).

Experimentation
Data in the experiment are historical daily prices of 20 stocks from Stock
Exchange of Thailand (SET). They are among top largest stocks and are ran­
domly selected from leaders of different major industries including energy,
telecommunication, banking, foods, infrastructure, property, etc. To study the
performance in varying market situations, the datasets are taken from the
following three different periods:

(A) 2014-1-2 to 2018–12-28

(B) 2015-1-5 to 2019–12-30
(C) 2016-1-4 to 2020–12-30

Each dataset ranges 5 years or about 1220 days and is split into 80:20 proportion
for training and testing. The training set is for constructing the classification
models whose performance will be compared using the testing set. The character­
istics of the stocks are summarized in Table 3. Column Sign Diff? indicates that the
direction of change in training set is different to the direction of change in testing
set. Such different patterns of training set and testing set makes it more difficult to
generalize the classification models. Figures 5-7 illustrate charts of the closing
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-241

Figure 4. Algorithm for trading recommendation.

prices of all stocks for the three datasets. It can be seen from both Table 3 and the
figures that the tested stocks have various characteristics: uptrend, downtrend,
fluctuation, and sideway, during the training and testing periods for evaluating the
proposed models under varying market situations. Figure 8 illustrates proportion
e2001178-242 C. WORASUCHEEP

Figure 5. Price charts of all stocks in dataset A (2014–2018). Training and testing datasets are
shown in green and blue colors.

of classd (or direction of price change) for testing set of each stock. Set {%Up, %
Notrend, %Down} maps to {1, 0, −1}. The Figure 8 shows that the classification
problem in this work is not imbalance.

Experimentation Setup

Details of the experimentation are as following (see Figure 1):

(1) Data Acquisition and Preparation: The downloaded data, including

open, high, low, close and volume, are used to calculate 45 technical
indicators (whose descriptions are in Table 1) with Python’s TA-Lib
library. They forms attributes or features of the dataset. For each dataset
range, the downloaded data actually begin at the prior 100 days for
necessary calculation of some technical indicators that require historical
data; e.g. DISP100 requires data of prior 100 days. Then every feature is
normalized to range [0, 1] before further processing.
(2) Feature Selection: A filter-based feature selection is employed to pick
a subset of 10 optimal features (from the existing 45 attributes) having
the highest Chi-square score. We’ve also tried with 8 and 12 features
and the results are not significantly different.
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-243

Figure 6. Price charts of all stocks in dataset B (2015–2019). Training and testing datasets are
shown in green and blue colors.

(3) Training with Hyperparameter Tuning: After feature selection, four base
classifiers are trained using the training set. We use Python scikit learn’s
gridsearchcv function to exhaustively search for the optimal hyperpara­
meter set of SVM, ANN, RF, XGB, and LGB as reported in subsection 3.4.
(4) Prediction and Result Ensemble: After training, five base classifiers are
independently used for prediction of daily classd of the testing set. Their
results are then ensembled using algorithm in subsection 3.5 to obtain
the prediction results of T3 and E5.
(5) Trading Simulation to Observe Performance: The prediction results of all 7
classifiers are further used for simulation using trading recommendation
described in subsection 3.5 for comparison. In the simulation, the initial
fund is 1,000,000 baht. Note that the amount of initial fund does not
matter in this experiment since the performance is based on the invest­
ment return R for whole testing period, and R is calculated as following.

valuef valuei
R¼ (2)
valuei
e2001178-244 C. WORASUCHEEP

Figure 7. Price charts of all stocks in dataset C (2016–2020). Training and testing datasets are
shown in green and blue colors.

where valued = cashd + onhandd × closed, and subscripts i and f denote

the initial day and the final day. Term onhandd denotes the number of
stocks held in portfolio on day d. The predicted classd will be used
to make trading decision on day d + 1 as described earlier.

Parameter Setting for Trading Simulation

All buy and sell transactions are subjected to 0.15% commission fee. The
decision threshold θ is set to 0.5%. The trading proportion parameter ρ is set
to 0.8. These trading parameters are set the same for all trading scenarios for
a fair comparison. In fact, we have tested the model with ρ ∈ [0.4, 0.6, 0.8,
1.0]. The results are not significantly different, but the configuration with
ρ = 0.8 offers the best results.

Performance Comparison

The above simulation is performed using seven classifiers independently. After

the trading simulation, the returns RSVM, RANN, RRF, RXGB, RLGB, RT3, and RE5
are to be compared with the returns from the Buy and hold (B&H) strategy,
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-245

Table 3. Characteristics of stocks used in the experiment.

Period 2014–2018 2015–2019 2016–2020
%Chg %Chg Sign %Chg %Chg Sign %Chg %Chg Sign
Stock (Training) (Testing) Diff? (Training) (Testing) Diff? (Training) (Testing) Diff?
BANPU.BK −7.8 −28.16 −20.35 −20.13 −1.12 −7.56
BBL.BK 23.49 −0.98 Y 6.84 −21.18 Y 6.33 −25.94 Y
BDMS.BK 92.66 17.54 37.78 6.12 18.18 −20 Y
BH.BK 129.94 −3.35 Y 35.38 −21.39 Y −29.61 −18.37
BJC.BK 52.07 −21.01 Y 34.97 −15.15 Y 39.9 −17.26 Y
CPALL.BK 96.25 −12.42 Y 61.76 2.85 91.03 −19.38 Y
CPF.BK −18.69 0.41 Y −9.72 10.89 Y 56.25 −2.73 Y
CPN.BK 128 −11.8 Y 67.98 −17 Y 38.67 −23.29 Y
EGCO.BK 81.82 14.29 52.15 33.33 117.11 −41.31 Y
HANA.BK 85.15 −27.47 Y −12.58 7.81 Y 1.45 15.22
HMPRO.BK 110.13 16.92 101.41 5.96 133.33 −14.38 Y
KBANK.BK 62.89 −23.55 Y −15.91 −18.38 1.69 −25.17 Y
LH.BK 51.43 −5.71 Y 10 −2 Y 7.14 −18.88 Y
PTT.BK 64.23 −2.54 Y 46.03 −4.86 Y 85.92 −3.41 Y
PTTEP.BK −34.52 7.08 Y 6.07 10.67 123.32 −21.08 Y
QH.BK 48.4 −16.03 Y −15.09 −4.48 10.43 −9.38 Y
SCC.BK 28.61 −12.1 Y −3.11 −10.09 −13.33 −3.57
TASCO.BK 364.25 −35.84 Y 123.08 47.22 −47.67 −17.45
TOP.BK 98.15 −37.79 Y 54.97 9.41 11.16 −25.45 Y
TVO.BK 59.46 −10.17 Y 25 2.8 20 22.73
Mean 75.8 −9.6 29.3 0.1 33.5 −13.8

Figure 8. Proportions of % price changes.

RBH, as baseline. The return RBH in this case is computed from the closing
price of the last day (closef) and the opening price of first day (openi) of the
testing dataset, as following:

closef openi
RBH ¼ (3)
openi
e2001178-246 C. WORASUCHEEP

The main metrics for comparison are return surplus and Sharpe ratio. Return
surplus (Δ) is difference of the return from algorithm and the return from
B&H strategy, i.e. ΔT3 = RT3 – RBH. A positive surplus means that using the
algorithm obtains a higher return than using B&H strategy, and of course the
higher Δ achieved, the better the algorithm is.
To measure the volatility or risk of trading, Sharpe ratio (Sr) is the average
return earned in excess of the risk-free rate per unit of volatility, represented
by the standard deviation σp. For good return/risk ratio, Sr should be higher
than 1.0. Sr is calculated by
Rp Rf
Sr¼ (4)
σp
where Rp is return rate from investment and Rf or risk-free rate is the return of
an investment with risk-free asset, i.e. short-term government treasury bills. In
this experiment, Rf is set to 2%, 2% and 0.1% for datasets A, B, and
C respectively; these are average values obtained from web Interest Rate of
Bank of Thailand (https://www.bot.or.th/English/Statistics/FinancialMarkets/
InterestRate/Pages/InterestRate.aspx).
It’s also interesting to observe the case of If we know the future (KF). The
return RKF is computed based on the formulae which is similar to the case
of prediction. However, the trading decision (buying, selling or do-
nothing) is based on the actual class values, as if we know the future
closing prices.
valuef valuei
RKF ¼ (5)
valuei
Obviously, if we know the future, the return from trading (RKF) is very high.
This is confirmed from the column RKF in Table 4. It unquestionably beats
other trading strategies for every stock and thus is regarded as the ideal case.
Therefore, we here will focus on only the cases of seven classifiers compared
with B&H strategy.
In addition, we investigate the relationship of return of proposed ensem­
ble model and accuracy metric. Accuracy (Ac) is the total number of
correct predictions divided by the total number of predictions made for
a dataset.

Results and Discussions

Table 4 lists accuracies of predictions and returns of trading from seven
classifiers using the same testing dataset (A, B, and C separately). For
a better comparison, Table 5 reports the return surpluses (Δ) of all 7 classifiers.
Then their averages, together with average Sharpe ratios (Sr) and average
Table 4. Results of accuracy values and returns of trading.
Dataset A. 2014 – 2018
Name RBH RKF ACSVM RSVM ACANN RANN ACRF RRF ACXGB RXGB ACLGB RLGB RT3 RE5
BANPU.BK -25.243 153.675 0.475 0 0.475 0.323 0.475 -2.063 0.484 7 0.516 6.335 3.416 0.863
BBL.BK -2.913 68.532 0.328 0 0.287 -7.698 0.377 17.738 0.365 9.112 0.377 15.635 9.242 12.011
BDMS.BK 15.094 144.179 0.348 13.828 0.365 11.121 0.283 8.786 0.275 1.69 0.398 25.249 14.112 -0.433
BH.BK -5.641 123.939 0.439 7.238 0.455 8.014 0.447 1.434 0.434 -1.638 0.381 -12.734 2.531 -0.005
BJC.BK -21.875 131.069 0.381 -2.557 0.393 0 0.393 -5.524 0.357 1.924 0.439 32.505 2.507 5.326
CPALL.BK -12.975 84.184 0.287 -12.493 0.324 -5.834 0.393 9.594 0.398 2.365 0.348 -13.307 -0.266 -1.886
CPF.BK -2.033 106.462 0.398 2.483 0.410 6.069 0.414 13.076 0.422 2.045 0.402 1.677 4.189 6.893
CPN.BK -13.864 82.193 0.447 -0.167 0.439 -0.413 0.467 -0.517 0.439 1.931 0.455 -5.671 3.558 -1.163
EGCO.BK 12.442 88.371 0.385 13.675 0.377 2.756 0.389 14.901 0.410 22.879 0.422 20.428 21.538 18.361
HANA.BK -30.22 182.606 0.512 1.202 0.475 6.139 0.439 -21.663 0.434 -19.594 0.459 -17.842 -21.449 -10.487
HMPRO.BK 13.74 142.904 0.463 19.598 0.516 34.704 0.459 10.595 0.467 17.22 0.475 11.8 23.154 13.372
KBANK.BK -24.38 99.788 0.406 -6.792 0.418 -11.625 0.463 -1.798 0.393 -8.934 0.406 -19.155 -2.134 1.081
LH.BK -8.019 95.108 0.389 6.753 0.406 4.69 0.418 9.032 0.439 13.921 0.422 12.282 4.879 5.19
PTT.BK -3.072 153.270 0.393 -4.844 0.434 1.9 0.459 6.521 0.393 -12.408 0.422 -4.919 -9.212 -6.498
PTTEP.BK 6.542 221.384 0.357 0 0.393 15.519 0.381 16.703 0.377 6.519 0.393 22.284 23.336 36.434
QH.BK -16.561 129.308 0.484 0 0.492 2.589 0.488 5.521 0.496 8.917 0.443 -2.566 5.869 6.742
SCC.BK -12.903 67.318 0.381 7.195 0.336 -3.226 0.430 -4.263 0.357 -8.294 0.365 -12.415 -8.008 -1.692
TASCO.BK -35.841 207.807 0.529 0 0.443 -18.351 0.484 -16.31 0.459 -2.293 0.447 -25.289 -19.414 -22.539
TOP.BK -38.152 142.087 0.410 -22.21 0.357 -35.495 0.414 -20.129 0.426 -24.097 0.398 -34.913 -25.589 -23.008
TVO.BK -10.924 138.971 0.439 2.562 0.475 2.145 0.459 -4.024 0.480 6.424 0.422 -9.373 -1.553 2.195
Dataset B. 2015 – 2019
Name RBH RKF ACSVM RSVM ACANN RANN ACRF RRF ACXGB RXGB ACLGB RLGB RT3 RE5
BANPU.BK -20.667 160.750 0.537 0 0.545 12.681 0.516 13.013 0.516 16.988 0.549 18.698 14.815 28.473
BBL.BK -21.814 65.005 0.402 0 0.430 -9.102 0.393 -6.88 0.385 -9.833 0.381 -7.66 -3.873 -9.105
BDMS.BK 6.122 111.213 0.340 7.515 0.332 1.554 0.434 22.529 0.377 3.023 0.320 -4.498 9.416 5.43
BH.BK -22.281 102.538 0.385 -10.257 0.402 -8.335 0.398 -16.958 0.410 3.658 0.369 -21.352 -16.311 -6.381
APPLIED ARTIFICIAL INTELLIGENCE

BJC.BK -13.065 120.869 0.426 0 0.418 -5.751 0.467 5.98 0.451 -1.276 0.467 9.684 16.116 6.797
CPALL.BK 4.965 84.797 0.332 4.597 0.348 6.551 0.377 -3.706 0.348 2.742 0.393 5.307 2.538 3.411
CPF.BK 10 140.335 0.353 3.15 0.348 0 0.426 25.88 0.418 28.6 0.443 24.707 30.647 26.371
CPN.BK -16.333 95.276 0.393 -8.162 0.393 -3.826 0.398 -0.451 0.398 -2.23 0.414 -3.963 2.797 4.822
EGCO.BK 34.146 143.653 0.312 -2.331 0.287 4.678 0.328 -6.366 0.385 4.295 0.361 9.745 17.463 -5.762
HANA.BK 10.236 276.257 0.406 -8.707 0.402 -0.133 0.443 -2.475 0.459 16.206 0.492 30.645 11.766 3.667
HMPRO.BK 7.285 103.741 0.451 8.531 0.488 24.299 0.508 9.656 0.434 4.445 0.455 16.051 14.13 21.002
e2001178-247

(Continued)
Table 4. (Continued).
Dataset B. 2015 – 2019
e2001178-248

KBANK.BK -19.571 105.524 0.426 -1.317 0.410 -4.843 0.422 7.716 0.443 7.361 0.410 -8.997 14.03 9.114
LH.BK -2 74.199 0.377 4.871 0.361 -1.017 0.381 -1.234 0.406 -2.764 0.426 6.46 0.328 0.881
PTT.BK -4.839 84.675 0.496 0 0.500 1.97 0.336 -8.191 0.320 -9.233 0.398 -7.332 -7.1 -3.322
PTTEP.BK 10.573 119.194 0.361 0 0.316 2.535 0.353 6.298 0.344 -4.037 0.373 14.512 11.273 -0.555
QH.BK -5.224 79.658 0.414 0 0.410 1.241 0.434 0.82 0.406 3.766 0.459 6.496 7.719 9.169
SCC.BK -10.502 75.854 0.385 -2.981 0.385 -1.989 0.381 -7.199 0.385 -11.208 0.353 -5.259 -5.059 -3.343
TASCO.BK 41.781 250.891 0.406 0 0.402 -3.573 0.406 13.475 0.422 29.601 0.406 8.582 22.683 11.077
TOP.BK 8.108 186.200 0.389 14.838 0.389 0 0.422 27.096 0.426 32.565 0.414 35.591 43.655 39.199
TVO.BK 3.774 99.555 0.430 0 0.439 0.189 0.443 14.187 0.430 3.762 0.459 11.829 13.779 12.382
C. WORASUCHEEP

Dataset C. 2016 – 2020

Name RBH RKF ACSVM RSVM ACANN RANN ACRF RRF ACXGB RXGB ACLGB RLGB RT3 RE5
BANPU.BK -5 897.537 0.459 0 0.459 0 0.5164 20.17 0.373 -48.498 0.4959 -0.042 6.878 -35.798
BBL.BK -24.224 336.123 0.3484 -24.304 0.3484 -20.503 0.3852 -17.94 0.3852 -18.983 0.4344 -2.644 0.793 -12.355
BDMS.BK -18.846 176.694 0.3811 -15.001 0.3402 -11.027 0.3975 -17.345 0.3893 -4.296 0.3074 -25.983 -8.64 -13.212
BH.BK -16.949 371.764 0.4508 0 0.4836 -10.2 0.4549 -8.134 0.4918 16.354 0.4795 -10.29 8.86 8.532
BJC.BK -16.667 409.589 0.5 37.432 0.5082 3.119 0.4672 24.954 0.4754 8.27 0.4344 0.247 11.622 36.211
CPALL.BK -18.276 158.64 0.3484 -9.832 0.3525 -18.501 0.3893 -0.839 0.4344 26.724 0.3648 20.516 16.259 9.416
CPF.BK -0.909 296.664 0.4672 6.203 0.4672 10.811 0.4549 2.746 0.4713 11.206 0.5123 22.095 11.907 19.921
CPN.BK -20.884 544.397 0.4549 -4.868 0.4836 -0.218 0.4713 -9.265 0.4303 -23.472 0.4344 -16.204 -8.69 -9.362
EGCO.BK -40.455 277.202 0.2787 -37.933 0.2336 -40.384 0.3238 -38.556 0.3484 -29.074 0.3156 -11.422 -24.326 -36.461
HANA.BK 13.768 904.633 0.4795 -11.844 0.5328 20.369 0.4836 23.722 0.4836 16.209 0.4795 18.332 17.041 9.064
HMPRO.BK -14.286 399.591 0.4631 6.89 0.459 -4.008 0.5 -6.596 0.5082 5.609 0.4918 -4.67 6.412 -4.775
KBANK.BK -23.432 541.116 0.5041 0 0.377 -42.943 0.4139 -9.229 0.418 3.316 0.4098 -12.502 -9.956 -9.143
LH.BK -17.347 251.482 0.3893 -9.377 0.4713 16.814 0.4385 -14.606 0.4221 -3.477 0.4262 -13.174 -13.923 13.474
PTT.BK -2.26 409.392 0.4467 0 0.5164 2.383 0.4754 -2.134 0.4016 12.254 0.459 10.25 -1.321 -8.973
PTTEP.BK -21.713 614.184 0.3975 -22.329 0.3852 -31.364 0.4754 -0.567 0.4057 -4.822 0.4877 -4.157 -1.348 -13.318
QH.BK -9.375 172.429 0.418 -10.885 0.4385 15.667 0.4057 -4.85 0.4098 -8.451 0.4713 34.06 -0.92 11.112
SCC.BK -2.296 198.313 0.3934 22.081 0.2705 -14.064 0.4139 9.933 0.4754 37.335 0.4385 20.546 33.902 28.057
TASCO.BK -16.038 521.015 0.4426 0 0.4426 0 0.4426 15.466 0.4672 22.448 0.459 13.026 23.323 3.181
TOP.BK -23.929 989.786 0.4795 -18.512 0.5861 36.088 0.4713 -9.644 0.5164 -13.581 0.4795 -25.987 -16.396 23.854
TVO.BK 27.523 323.796 0.4426 0 0.4385 3.68 0.4836 58.248 0.4836 25.628 0.4713 50.331 59.926 38.302
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-249

Table 5. Return Surpluses ΔX = RX – RBH.

Dataset A. 2014 – 2018
Stock ΔSVM ΔANN ΔRF ΔXGB ΔLGB ΔT3 ΔE5
BANPU.BK 25.24 25.57 23.18 32.24 31.58 28.66 26.11
BBL.BK 2.91 -4.79 20.65 12.03 18.55 12.16 14.92
BDMS.BK -1.27 -3.97 -6.31 -13.40 10.16 -0.98 -15.53
BH.BK 12.88 13.66 7.08 4.00 -7.09 8.17 5.64
BJC.BK 19.32 21.88 16.35 23.80 54.38 24.38 27.20
CPALL.BK 0.48 7.14 22.57 15.34 -0.33 12.71 11.09
CPF.BK 4.52 8.10 15.11 4.08 3.71 6.22 8.93
CPN.BK 13.70 13.45 13.35 15.80 8.19 17.42 12.70
EGCO.BK 1.23 -9.69 2.46 10.44 7.99 9.10 5.92
HANA.BK 31.42 36.36 8.56 10.63 12.38 8.77 19.73
HMPRO.BK 5.86 20.96 -3.14 3.48 -1.94 9.41 -0.37
KBANK.BK 17.59 12.75 22.58 15.45 5.22 22.25 25.46
LH.BK 14.77 12.71 17.05 21.94 20.30 12.90 13.21
PTT.BK -1.77 4.97 9.59 -9.34 -1.85 -6.14 -3.43
PTTEP.BK -6.54 8.98 10.16 -0.02 15.74 16.79 29.89
QH.BK 16.56 19.15 22.08 25.48 14.00 22.43 23.30
SCC.BK 20.10 9.68 8.64 4.61 0.49 4.90 11.21
TASCO.BK 35.84 17.49 19.53 33.55 10.55 16.43 13.30
TOP.BK 15.94 2.66 18.02 14.06 3.24 12.56 15.14
TVO.BK 13.49 13.07 6.90 17.35 1.55 9.37 13.12
Dataset B. 2015 – 2019
Stock ΔSVM ΔANN ΔRF ΔXGB ΔLGB ΔT3 ΔE5
BANPU.BK 20.67 33.35 33.68 37.66 39.37 35.48 49.14
BBL.BK 21.81 12.71 14.93 11.98 14.15 17.94 12.71
BDMS.BK 1.39 -4.57 16.41 -3.10 -10.62 3.29 -0.69
BH.BK 12.02 13.95 5.32 25.94 0.93 5.97 15.90
BJC.BK 13.07 7.31 19.04 11.79 22.75 29.18 19.86
CPALL.BK -0.37 1.59 -8.67 -2.22 0.34 -2.43 -1.55
CPF.BK -6.85 -10.00 15.88 18.60 14.71 20.65 16.37
CPN.BK 8.17 12.51 15.88 14.10 12.37 19.13 21.15
EGCO.BK -36.48 -29.47 -40.51 -29.85 -24.40 -16.68 -39.91
HANA.BK -18.94 -10.37 -12.71 5.97 20.41 1.53 -6.57
HMPRO.BK 1.25 17.01 2.37 -2.84 8.77 6.85 13.72
KBANK.BK 18.25 14.73 27.29 26.93 10.57 33.60 28.69
LH.BK 6.87 0.98 0.77 -0.76 8.46 2.33 2.88
PTT.BK 4.84 6.81 -3.35 -4.39 -2.49 -2.26 1.52
PTTEP.BK -10.57 -8.04 -4.28 -14.61 3.94 0.70 -11.13
QH.BK 5.22 6.47 6.04 8.99 11.72 12.94 14.39
SCC.BK 7.52 8.51 3.30 -0.71 5.24 5.44 7.16
TASCO.BK -41.78 -45.35 -28.31 -12.18 -33.20 -19.10 -30.70
TOP.BK 6.73 -8.11 18.99 24.46 27.48 35.55 31.09
TVO.BK -3.77 -3.59 10.41 -0.01 8.06 10.00 8.61
Dataset C. 2016 – 2020
Stock ΔSVM ΔANN ΔRF ΔXGB ΔLGB ΔT3 ΔE5
BANPU.BK 5.00 5.00 25.17 -43.50 4.96 11.88 -30.80
BBL.BK -0.08 3.72 6.28 5.24 21.58 25.02 11.87
BDMS.BK 3.84 7.82 1.50 14.55 -7.14 10.21 5.63
BH.BK 16.95 6.75 8.82 33.30 6.66 25.81 25.48
BJC.BK 54.10 19.79 41.62 24.94 16.91 28.29 52.88
CPALL.BK 8.44 -0.23 17.44 45.00 38.79 34.54 27.69
CPF.BK 7.11 11.72 3.66 12.12 23.00 12.82 20.83
CPN.BK 16.02 20.67 11.62 -2.59 4.68 12.19 11.52
EGCO.BK 2.52 0.07 1.90 11.38 29.03 16.13 3.99
HANA.BK -25.61 6.60 9.95 2.44 4.56 3.27 -4.70
HMPRO.BK 21.18 10.28 7.69 19.90 9.62 20.70 9.51
(Continued)
e2001178-250 C. WORASUCHEEP

Table 5. (Continued).
Dataset C. 2016 – 2020
KBANK.BK 23.43 -19.51 14.20 26.75 10.93 13.48 14.29
LH.BK 7.97 34.16 2.74 13.87 4.17 3.42 30.82
PTT.BK 2.26 4.64 0.13 14.51 12.51 0.94 -6.71
PTTEP.BK -0.62 -9.65 21.15 16.89 17.56 20.37 8.40
QH.BK -1.51 25.04 4.52 0.92 43.44 8.46 20.49
SCC.BK 24.38 -11.77 12.23 39.63 22.84 36.20 30.35
TASCO.BK 16.04 16.04 31.50 38.49 29.06 39.36 19.22
TOP.BK 5.42 60.02 14.28 10.35 -2.06 7.53 47.78
TVO.BK -27.52 -23.84 30.72 -1.89 22.81 32.40 10.78

accuracies (Ac), are displayed in Table 6. The higher Δ indicates more profit
given by such algorithm, whereas the higher Sr reflects a better excess return
per risk. As a baseline reference, Table 7 reports the averages of returns from
B&H (RBH). To identify the superior performance among 7 classifiers, their
returns are ranked from 1 (best) to 7 (worst) for 20 stocks. Next, those 20 ranks
are averaged for each classifier and listed in Table 8 as average rank. Table 9
reports the correlation coefficients (Cor) of return and accuracy of all classi­
fiers. Figure 9 illustrates the comparative returns of all classifiers over testing
periods for some largest stocks in different sectors.
Here are the observations from Tables 6 to 9.
(1) In Table 6, all average Δs are greater than 0, indicating that on average
the proposed trading recommendation provides a more profitable return
than B&H.
(2) Among three datasets: A, B & C, T3 outperforms all base classifiers,
except in dataset A (ΔT3 = 12.375 < ΔRF = 12.720). In addition, E5 outper­
forms all base classifiers, except in dataset C (ΔE5 = 15.466
< ΔLGB = 15.696).
(3) T3 and E5 defeat all individual base classifiers in terms of the average Δ �
of three datasets: Δ� T3 = 13.513 (the highest), Δ
� E5 = 11.993 (the second best),
with ranking as Δ � T3 > Δ
� E5 > Δ
� LGB > Δ
� XGB > Δ � RF > Δ
� ANN > Δ � SVM.

Table 6. Averages of return surplus (ΔX = RX – RBH), Sharpe ratios (Sr), and accuracy (Ac).
Metric Dataset SVM ANN RF XGB LGB T3 E5
Average Δ A. 2014 – 2018 12.113 11.506 12.720 12.074 10.340 12.375 12.878
B. 2015 – 2019 0.453 0.822 4.625 5.787 6.928 10.006 7.632
C. 2016 – 2020 7.966 8.366 13.356 14.115 15.696 18.150 15.466
Δ Grand average 6.844 6.898 10.234 10.659 10.988 13.510 11.992
Average Sr A. 2014 – 2018 0.394 0.040 0.476 0.265 -0.298 0.755 0.916
B. 2015 – 2019 -0.063 -0.587 0.710 1.134 1.006 1.261 1.160
C. 2016 – 2020 -0.063 -0.009 0.710 0.910 1.071 1.586 1.225
Sr Grand average 0.089 -0.185 0.632 0.770 0.593 1.201 1.100
Average Ac A. 2014 – 2018 0.412 0.414 0.427 0.415 0.419 0.423 0.445
B. 2015 – 2019 0.401 0.400 0.413 0.408 0.417 0.497 0.463
C. 2016 – 2020 0.427 0.430 0.443 0.440 0.443 0.481 0.476
Ac Grand average 0.414 0.414 0.428 0.421 0.426 0.467 0.461
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-251

Figure 9. Comparative returns for some largest stocks.

e2001178-252 C. WORASUCHEEP

Figure 9. Continued.
 APPLIED ARTIFICIAL INTELLIGENCE e2001178-253

(4) Majority of average Sr are below 1.0, corresponding to the fluctuated

downtrend or sideway of price charts in Figure 5–7 and confirmed by the
averages of RBH in Table 7. Considering those Sr > 1.0 (bold font), both T3 and
E5 can achieve the highest Sr on average.
(5) In Table 8, T3 achieves the best average rank (lowest value) in all three
datasets.
(6) Based on above discussions, modern ensemble-based classifiers (XGB
and LGB) outperform classical SVM, ANN, and RF. And more importantly,
the proposed T3 and E5 outperform all base classifiers on average in terms of
both return and Sharpe ratio.
The following are discussions on accuracies and returns.
(7) In Table 6, T3 and E5 defeat all individual base classifiers in terms of
average accuracies of 3 datasets: Ac T3 = 0.467 (the highest), Ac E5 = 0.461
(the second), with ranking as Ac T3 > Ac E5 > Ac RF > Ac LGB > Ac XGB > Ac
SVM = Ac ANN.
(8) In Table 9, LGB, T3 and E5 have average values of Cor greater than 0.40,
which are higher than other classifiers. A higher positive value of Cor signifies
a stronger relationship between return and accuracy achieved by the classifier.
T3 achieves the highest Cor value in this case, and LGB ranked second.
Considering this together with Ac (in Table 7) and average rank of return
(in Table 8), we can observe that the selective majority voting scheme of T3
clearly helps improve the accuracy and return.
(9) In summary, the proposed T3 with majority voting of the 3 (out of 5)
classifiers with the highest accuracy outperforms the E5 with straightforward
majority voting as well as other base classifiers.

Conclusion and Future Works

This work brings together five widely used classifiers for trend prediction. The
proposed ensemble classifier T3 combines the results from base classifiers with
a selective majority voting by dropping out the results from two classifiers with
lowest accuracies. Hyperparameters of each base classifier are tuned with an
exhaustive grid search method. The prediction results are further used for
recommendation (to buy, to sell, or to do nothing) in a single-stock trading
simulation. Performance of all classifiers are compared using historical daily

Table 7. Averages of returns from B&H

(RBH).
Dataset Average RBH
A. 2014–2018 −10.840
B. 2015–2019 .035
C. 2016–2020 −12.580
Grand average RBH −7.795
e2001178-254 C. WORASUCHEEP

Table 8. Average ranks of return.

Dataset SVM ANN RF XGB LGB T3 E5
A. 2014–2018 3.90 4.30 3.90 3.75 4.85 3.65 3.65
B. 2015–2019 4.80 4.55 4.50 4.60 3.75 2.65 3.15
C. 2016–2020 4.65 4.50 4.30 3.45 4.10 2.95 3.95
Average 4.45 4.45 4.23 3.93 4.23 3.08 3.58

Table 9. Correlation coefficients (Cor) of return and accuracy.

Dataset SVM ANN RF XGB LGB T3 E5
A. 2014–2018 0.142 0.433 −0.388 0.157 0.115 0.327 0.284
B. 2015–2019 −0.065 0.300 0.489 0.517 0.555 0.479 0.463
C. 2016–2020 0.607 0.000 0.788 0.000 0.599 0.541 0.516
Average Cor 0.228 0.244 0.296 0.225 0.423 0.449 0.421

prices of 20 leading stocks in Stock Exchange of Thailand (SET). The inputs of

classifiers are 45 technical indicators calculated and taken through a feature
selection process. Empirical results reveal that the proposed ensemble T3
model clearly achieves a higher trading return and Sharpe ratio than B&H
strategy, all individual base classifiers, and the ensemble with straightforward
majority voting (E5). In addition, novel ensemble-based classifiers like
XGBoost and LightGBM have better performance than more classical classi­
fiers in this experiment.
Limitations and future works: However major limitations of this work are (i)
do not support short-selling which is in a roadmap of full adoption world-wide
and in SET, (ii) do not incorporate stop-loss mechanism, (iii) trading recom­
mendation is limited to a single stock. Future works shall support short-
selling, multistock trading recommendation with stop-loss mechanism and
using other classifiers with profitability-concerned metrics, more advanced
ensemble methods, feature selection methods. Other data sources including
fundamentals and online news should also be considered.

Disclosure statement
No potential conflict of interest was reported by the author(s).

ORCID
Chukiat Worasucheep http://orcid.org/0000-0001-7508-6150

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