Elliott Wave Theory and neuro-fuzzy systems, in stock market prediction: The WASP system

This paper presents the WASP (Wave Analysis Stock Prediction) system, a system based on the neuro-fuzzy architecture, which utilizes aspects from the Elliott Wave Theory, presented by Ralph Nelson Elliott. This theory has been found to be extremely useful and accurate, particularly in problems of forecasting. A neuro-fuzzy logic technique has been used to forecast the trend of the stock prices and the results derived are very encouraging.

Research highlights
► We combine neural networks, fuzzy logic and Elliott Wave Theory to forecast stocks.
► A System is used which is retrained daily and provides the daily trend forecast.
► A confidence index is created supporting the impact of the forecast.
► The system was testes in a long period of 400 consecutive trading days.
► The Wasp system found to always outperform the Buy&Hold strategy.