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Python will make you rich in the stock market!

There are so many factors involved in the prediction of stock market performance hence it becomes one of the most difficult things to do especially when high accuracy is required. Here data science & its techniques have been used to search patterns and insights that were not approachable before. Learning Python- object-oriented programming, data manipulation, data modeling, and visualization is a ton of help for the same. So, what are you waiting for? Read the complete article and know how helpful Python for stock market.

Stocker is a Python class-based tool used for stock prediction and analysis. (for complete code refer GitHub) Stocker is designed to be very easy to handle. Even the beginners in python find it that way. It is one of the examples of how we are using python for stock market and how it can be used to handle stock market-related adventures.

Understanding Stock Market Analysis

Stock market analysis can be divided into two parts- Fundamental Analysis and Technical Analysis.

a. Fundamental Analysis

This includes analyzing the current business environment and finances to predict the future profitability of the company.

b. Technical Analysis

This deals with charts and statistics to identify trends in the stock market.

Predicting Stock with Python

In this blog of python for stock market, we will discuss two ways to predict stock with Python- Support Vector Regression (SVR) and Linear Regression.

Support Vector Regression (SVR)

Support Vector Regression (SVR) is a kind of Support Vector Machine (SVM). It is a supervised learning algorithm which analyzes data for regression analysis. This was invented in 1996 by Christopher Burges et al. The cost function for building a model with SVR ignores training data close to the prediction model, so the model produced depends on only a subset of the training data.

SVMs are effective in high-dimensional spaces, with clear margin of separation and where the number of samples is less than the number of dimensions. However, they don’t perform so well with large or noisy datasets.

Linear Regression

Linear Regression linearly models the relationship between a dependent variable and one or more independent variables. This is simple to implement and is used for predicting numeric values. But this is prone to overfitting and can’t be used where there’s a non-linear relationship between dependent and independent variables.

Python for Stock market

Let’s look at the analytical capabilities of Stocker in parts.

Starting with Stocker

The first thing that should be done is importing the Stocker class into the current python session after installing the required libraries. You can use it to create an object. The constructed object will contain all the properties of the Stocker class. As the stocker is built on quandl WIKI database hence it allows access to 3000 and more US stocks.

Python classes are comprised of – attributes and methods. Amongst all the attributes of the class, one of it is stock data for a specific company.

The benefits of using the Python class include – the functions and the data it acts on are associated with the same object. The entire history of the stock can be plotted by using the method of the Stocker object. The ‘plot_stock’ function has a number of arguments that are optional and by default, it plots the adjusted closing price for the entire date range that can also be customized according to our needs (range, stats to be plotted, type of plot). Using ‘plot)stock’ we can investigate any number of quantities in the data present in any data range and also suggest real-world correlations.

Additive tools

These are very powerful for analyzing and predicting time series. We know that the long term trend of any established multinational company seems to be increasing in nature but there is a possibility of identifying yearly or daily basis patterns. Such help of time series with daily observations can be provided by Prophet, developed by Facebook. Stocker can do all the work that be done by Prophet behind the scenes using simple method call to create and inspect the model.

These types of models remove disturbance present in data and smoothen it. Prophet models also look into fluctuations of data in real-life processes and make predictions for the future. Though there is concern related to past data but future data analysis is what companies strive for. This method call returns two objects (data and model) which are then assigned to variables that are later on used to plot time series components.

Changepoints

It occurs when the time-series go from increasing to decreasing or vice-versa. These patterns are also very important as one needs to know when the stock rate is at its peak or there are significant economic benefits. Identifying these points and their cause of change helps in predicting the future. The stocker object can automatically predict the 10 largest changepoints which tend to line up near the peaks and valleys of the stock price graph (generally). On the other hand, the prophet can only find changepoints in the first 80% data only. Google search tools allow us to see the popularity of any search word over time in Google searches. Stocker can automatically retrieve this data for any specific term.