Forex Market Prediction Using NARX Neural Network with Bagging

Abstract

We propose a new methodfor predicting movements in Forex market based on NARX neural network withtime shifting bagging techniqueand financial indicators, such as relative strength index and stochastic indicators. Neural networks have prominent learning ability but they often exhibit bad and unpredictable performance for noisy data. When compared with the static neural networks, our method significantly reducesthe error rate of the responseandimproves the performance of the prediction. We tested three different types ofarchitecture for predicting the response and determined the best network approach. We applied our method to prediction the hourly foreign exchange rates and found remarkable predictability in comprehensive experiments with 2 different foreign exchange rates (GBPUSD and EURUSD).