Predicting Stock Prices using Permutation Decision Trees and Strategic Trailing

• URL: http://arxiv.org/abs/2504.12828v2
• Date: Fri, 18 Apr 2025 07:00:06 GMT
• Title: Predicting Stock Prices using Permutation Decision Trees and Strategic Trailing
• Authors: Vishrut Ramraj, Nithin Nagaraj, Harikrishnan N B,
• Abstract summary: We focus on high-frequency data using 5-minute candlesticks for the top 50 stocks listed in the NIFTY 50 index.<n>We implement a trading strategy that aims to buy stocks at lower prices and sell them at higher prices, capitalizing on short-term market fluctuations.
• Score: 2.7309692684728617
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: In this paper, we explore the application of Permutation Decision Trees (PDT) and strategic trailing for predicting stock market movements and executing profitable trades in the Indian stock market. We focus on high-frequency data using 5-minute candlesticks for the top 50 stocks listed in the NIFTY 50 index. We implement a trading strategy that aims to buy stocks at lower prices and sell them at higher prices, capitalizing on short-term market fluctuations. Due to regulatory constraints in India, short selling is not considered in our strategy. The model incorporates various technical indicators and employs hyperparameters such as the trailing stop-loss value and support thresholds to manage risk effectively. Our results indicate that the proposed trading bot has the potential to outperform the market average and yield returns higher than the risk-free rate offered by 10-year Indian government bonds. We trained and tested data on a 60 day dataset provided by Yahoo Finance. Specifically, 12 days for testing and 48 days for training. Our bot based on permutation decision tree achieved a profit of 1.3468 % over a 12-day testing period, where as a bot based on LSTM gave a return of 0.1238 % over a 12-day testing period and a bot based on RNN gave a return of 0.3096 % over a 12-day testing period. All of the bots outperform the buy-and-hold strategy, which resulted in a loss of 2.2508 %.

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