Combinatorial Impact of Technical Indicators on Price Prediction in Colombo Stock Market

Abstract

Predicting the price in a stock market is a challenging task in a financial time series. Most researchers have predicted the stock market by using individual technical indicators. Investors can make use of this technology to find hidden patterns from the historic data to help them in their investment decisions. Despite the technical indicators are well-founded on the theory that the historical data holds the essential memory for predicting the future direction, there are several drawbacks when considering individual indicators. This research investigates the combinatorial effect of various technical indicators to analyze and forecast the stock market. Eleven technical indicators are combined with diverse ways to predict if the day’s closing price would increase or decrease by ignoring the combinations which give more difference between the closing price. The combination of the 14-days Standard Deviation, 20-days Chaikin Money Flow Indicator with the average of 14-days Simple Moving Average, 14-days Bollinger Band, 14-days Upper Band, 14-days Lower Band, Average Price, 14-days Exponential Moving Average is found to be best.