APPLICATION OF DATA MINING TECHNIQUES IN STOCK MARKETS : The stock market is a complex, no stationary, chaotic and non-linear dynamic

system. Forecasting stock market, currency exchange rate, bank bankruptcies, understanding and managing financial risk, trading futures, credit rating, loan management, bank customer profiling, and money laundering analyses are core financial tasks for data mining. Some of these tasks such as bank customer profiling have many similarities with data mining for customer profiling in other fields. Stock market forecasting includes uncovering market trends, planning investment strategies, identifying the best time to purchase the stocks and what stocks to purchase. Financial institutions produce huge data sets that build a foundation for approaching these enormously complex and dynamic problems with data mining tools. Potential significant benefits of solving these problems motivated extensive research for years. Applications of Genetic Algorithms in Stock Market Data Mining Optimisation : In stock market and other finance fields, Genetic Algorithm has been applied in many problems . There have been a number of attempts to use GA for acquiring technical trading rules, both for Foreign Exchange Trading Through analysing the stock market, we know there are some combinations of the parameters, which can produce a near-max profit and give some reasonable buy/sell suggestions. So our objective is to find one of these near-max profit combinations efficiently. Genetic Algorithm : Genetic Algorithm is a heuristic function for optimization, where the extreme of the function (i.e., minimal or maximal) cannot be established analytically. A population of potential solutions is refined iteratively by employing a strategy inspired by Darwinist evolution or natural selection.

Genetic Algorithms promote survival of the fittest . This type of heuristic has been applied in many different fields, including construction of neural networks and finance. We represented the parameters of a trading rule with a one-dimension vector that is called chromosome , each element is called a gene , and all of the chromosomes are called population . Here, each gene stands for a parameter value; each chromosome is the set of parameters of one trading rule. Generally, genetic operations include: crossover , mutation and selection . Crossover operator. Suppose S1={s11, s12, , s1n}, S2={s21, s22, , s2n}, are two chromosomes, select a random integer number 0 r n, S3, S4 are offspring of crossover(S1, S2), S3={si | if i r, si S1, else si S2}, S4={si | if i r, si S2, else si S1}. Mutation operator. Suppose a chromosome S1={s11, s12, , s1n}, select a random integer number 0 r n, S3 is a mutation of S1, S3={si | if i r, then si=s1i, else si =random(s1i)}. Selection operator. Suppose there are m individuals, we select [m/2] individuals but erase the others, the ones we selected are more fitness that means their profits are greater. Genetic Algorithm. 1. InitializePopulation: Producing a number of individuals randomly, each individual is a chromosome which is an n-length array, n is the number of parameters. 2. Test if one of the stopping criteria (running time, fitness, generations, etc) holds. If yes, stop the genetic procedure. 3. Selection: Select the better chromosomes. It means the profit under these parameters is greater. 4. Applying the genetic operators: such as crossover and mutation to the selected parents to generate an offspring.

5. Recombine the offspring and current population to form a new population with selection operator. 6. Repeat steps 2-5. The Genetic Algorithm: P InitializePopulation(); While (not stop (P)) do Parents[1..2] SelectParents(P); Offspring[1] Crossover(Parents[1]); Offspring[2] Mutation(Parents[2]); P Selection(P, Parents[1..2], Offspring [1..2]); Endwhile. Application of neural network Data Mining Technique in stock markets : The characteristic that all stock markets have in common is the uncertainty, which is related to their short and longterm future state. This feature is undesirable for the investor but it is also unavoidable whenever the stock market is selected as the investment tool. The best that one can do is to try to reduce this uncertainty. Stock market prediction is one of the instruments in this process. A modified neural network forecasting model is presented, and an intelligent mining system is developed. The system can forecast the buying and selling signs according to the prediction of future trends to stock market, and provide decision-making for stock investors. The main advantage of neural networks is that they can approximate any nonlinear function to an arbitrary degree of accuracy with a suitable number of hidden units.

Application of clustering Data Mining Technique in stock markets : As part of a stock market analysis and prediction system consisting of an expert system and

clustering of stock rices, data is needed. Stock markets are recently triggering a growing interest in the physicists community. The objective of this attention is to understand the underlying dynamics which rules the companies stock prices. It would be useful to find, inside a given stock market index, groups of companies sharing a similar temporal behavior. To this purpose, a clustering approach to the problem may represent a good strategy.

Stock Prediction using Decision Tree Data Mining Technique :

Stock market prediction is the act of trying to determine the future value of a company stock or other financial instrument traded on a financial exchange. The successful prediction of a stock's future price could yield significant profit. Some believe that stock price movements are governed by the random walk hypothesis and thus are unpredictable. Others disagree and those with this viewpoint possess a myriad of methods and technologies which purportedly allow them to gain future price information. Each technical indicator may work for a particular stock and at a certain moment in time This means that i) rules based on indicators should evolve in time and ii) each stock should be processed independently. Note that the second point doesnt mean that there are no correlation between a particular stock and the sector it belongs to. It only means that stocks may behave differently and thus should be treated independently. However, any information from their sector could be used in the forecasting process. When seen as a balck box, the system has information about a specific stock (such as open, high, low, close, volume, etc.) as input and a class value as output. The class is fixed this way:

1 if close[j+n] > (x% * close[j]) + close[j]

-1 otherwise

where n is the difference between the current day and the day predicted and x is a value chosen to take transaction fees into account (note that a fixed value could also be chosen instead of a percentage). The class predictions are thus made for each stock independently. One year daily data is used for training and the following month for testing. A shifting window process is made so that the system adapts itself to the current market.