Exploiting Visual Features in Financial Time Series Prediction

A Different Approach To Time Series

As stated at Introduction, the main and intriguing question here is: would a certain FOREX rate be likely to go up or down in the following hours?

Vast majority of time series prediction models are Moving Average (MA) based; such as Auto Regressive Moving Average (ARMA), Auto Regressive Integrated Moving Average (ARIMA), Auto Regressive Integrated Moving Average with eXogeneous input (ARIMAX) and Nonlinear Auto Regressive Moving Average with eXogeneous input (NARMAX). Since the intention is to use past price movements only, there is a need to come up with something creative to make a difference. Therefore, we do not include any MA in our prediction model. Instead, we propose the usage of visual features related to the shapes of FOREX price movements to classify future trends. We are inspired by the fact that one can somewhat determine the differences among the price movements by visually inspecting their graphs. The proposed approach; called herein Finance Vision method, is similar to Machine Vision which is the technology that employs image processing methods to recognize patterns, in the way that, the FOREX price movements are treated like images to get certain features, just as the saying goes: “a picture is worth a thousand words” (Duda et al., 1973), (Gonzales & Woods, 2007). These features are then used for training state-of-the-art classifiers to recognize future price trends. Experiments show that comparable recognition rates are obtained. Consequently, Finance Vision can be defined as financial time series recognition and prediction using visual properties of financial time series graphs.