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Identifying Candlestick Patterns Using Deep Learning

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51 views4 pages

Identifying Candlestick Patterns Using Deep Learning

Uploaded by

sebaleon67
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Identifying Candlestick Patterns using Deep Learning

towardsdatascience.com/identifying-candlestick-patterns-using-deep-learning-b7d706726874

September 17, 2020

Training a neural network on candlestick charts and then using it


to identify patterns on it

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Some of the heatmaps generated using the method described below
(Image by author).

Recently I completed a very interesting project wherein I attempted to identify candlestick


patterns on charts of Large Cap Indian stocks using Deep learning, and the results were
very interesting! This blog is a tutorial so that you can try out this fascinating
“Experiment” on your own.

I am calling this an “Experiment” to emphasize that it is one and to make it very clear
that you should not take any financial decisions based on the content given here!

Briefly, we will be executing the following steps (using python) :

Collecting the daily historical stock data for multiple stocks using the python library
nsepy.
Converting the data into Candlestick charts.
Labelling the Candlestick charts as having an “Up” or “Down” movement based on
percentage movement (of close price) in a particular direction.
Training a Deep Learning Model on the data.
Getting the areas of interest (based on the values of activations)and visualizing them
using heat maps.

You can find the GitHub repo containing the Jupyter Notebooks for this project here. We
will be requiring the following libraries as we move ahead :

nsepy
pandas

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numpy
matplotlib
fastai

I will be explaining the code piece by piece. So let’s get started!

In the above piece of code we have defined functions to obtain the historical stock data
and to plot Candlestick charts for it. A brief overview :

The function “obtain_data” takes the ticker symbol and the start and end dates as
input and gives out a Pandas Dataframe containing the stock data.
The function “plot_candles” (which was originally written by Daniel Treiman to
which I have made minor changes) takes in the Pandas Dataframe and outputs a
Candlestick chart.

Sorry for the long output but I wanted it to be so, to give you an idea of how the code is working.

In the above section we are completing the following steps :

Obtaining the historic stock data (for the past two years) using the “obtain_data”
function.
Determine whether a particular chart should be classified into “Up” or “Down”
based on movement in the upcoming five days.
Create a Candlestick chart for a time period of 20 days.
Save the Candlestick chart to the respective folder (Up/Down).
Repeat for a number of different stocks.

We are now done with data gathering; let’s start training the model!

In the above piece of code we are setting up the data such that we can use it train a deep
learning model. We are completing the following tasks :

Setting the batch size for training the model.


Splitting the data into training and validation datasets.
Applying augmentations on the data (to reduce overfitting).

Now let’s start training the model !

We trained a deep learning model (having an accuracy of nearly 62 % on a validation set)


above. A more detailed overview of what we did is as follows :

Used transfer learning to train a pre-trained neural network on our charts using an
appropriate learning rate.
Increased the size of our images (for the earlier training cycles it was 224 by 224 and
then we increased it to 352 by 352)
Used transfer learning again to train the previous network on the new larger images
using an appropriate learning rate.

And we got an accuracy of nearly 62 % on our validation dataset !

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Now we will be creating heatmaps highlighting areas which were of interest to the neural
net using the activations. Let’s do so !

We completed the following steps in the above section :

Created a list of all the charts to be analyzed (the ones which were correctly
predicted with a high degree of certainty).
Got a particular image from the above list and transferred it to the GPU.
Used hooks to hook into the model during the forward pass to obtain the
activations.
Used the activations to create a heatmap using matplotlib.
Saved the heatmap.

And Voila ! We managed to train a neural network and use it to identify patterns in a
candlestick chart.

I would like to emphasize this again that please don’t use any of the content given here
to take any financial decisions!

Hope you enjoyed reading this blog,


Thanks for reading it till the end!

P.S.
Please feel free to connect with me on LinkedIn for any questions or suggestions.

P.P.S.
I have generated a lot heatmaps of candlestick charts, feel free to contact me if you would
like to have a look at them.

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