GoldMiner: A Genetic Programming based
algorithm applied to Brazilian Stock Market
Alexandre Pimenta
PPGEE
Universidade Federal de Minas Gerais
Belo Horizonte, MG, Brazil
Department of Computing
Instituto Federal de Minas Gerais
Formiga, MG, Brazil
alexandre.pimenta@ifmg.edu.br
Frederico Gadelha Guimares
Department of Electrical Engineering
Universidade Federal de Minas Gerais
Belo Horizonte, MG, Brazil
fredericoguimaraes@ufmg.br
Abstract The possibility of obtaining financial gain by
investing in the Stock Markets is a hard task since it is under
constant influence of economical, political and social factors. This
paper aims to address the financial technical analysis of Stock
Markets, focusing on time series data instead of subjective
parameters. An algorithm based on genetic programming,
named GoldMiner, has been proposed to perform retrospective
study in order to get predictions about the best time for trading
top stocks on the BOVESPA, the Brazilian stock exchange
market.
Keywords genetic programming, technical analysis,
exchange market, decision making
I INTRODUCTION
The stock market is seen as a possible source of income,
but its nature is complex and unstable. Predicting its future
behavior is not a simple task, since the stock market is
constantly influenced by economical, political and social
factors.
Some economists claim that the efficient market
hypothesis is valid [10]. This theory states that the price
variation of a stock behaves like a random walk and therefore
any price forecasting technique consists on a useless effort.
Another issue to be considered is the non-linearity of price
variation of an asset on the stock exchange.
Despite the difficulties in financial time series forecasting,
many efforts have been destined to provide better
understanding about the stock markets. Unconventional
978-1-4799-4518-4/14/$31.00 2014 IEEE
Eduardo G. Carrano
Department of Electrical Engineering
Universidade Federal de Minas Gerais
Belo Horizonte, MG, Brazil
carrano@cpdee.ufmg.br
Ciniro Aparecido Leite Nametala
Department of Engineering and Computing
Instituto Federal de Minas Gerais
Bambui, MG, Brazil
ciniro@ifmg.edu.br
Ricardo H. C. Takahashi
Department of Mathematics
Universidade Federal de Minas Gerais
Belo Horizonte, MG, Brazil
taka@mat.ufmg.br
techniques such as fuzzy logic and neural networks are being
widely used in an attempt to find satisfactory solutions to this
problem [2].
The automation of stock trade transactions is now a reality,
as it can be observed in several studies [2,4,6,7,9]. The
algorithms developed for this purpose ignore the efficient
market hypothesis and, therefore, have faced difficulties in
nonlinear time series forecasting.
This work proposes a computer system for decision-
making in stock trading at the Brazilian exchange market,
BOVESPA. The developed algorithm, named as GoldMiner,
was built based on four main concepts: genetic programming,
technical analysis of the stock market, scanning step, and
trading systems with targets.
The article was structured as follows: section II presents
the work related to the topic. In section III, schemes of
representation, operators of genetic programming and
indicators of technical analysis are. In section IV, an instance
of the problem and the testing framework is shown. Section V
discusses the results in four BOVESPA top stocks: BOVA11,
VALE5, PETR4, and BBAS3. Finally, some conclusions are
presented in Section VI.
II RELATED WORK
In this work, the forecasting techniques employed to stock
markets will be classified in three categories: conventional
397
methods, market methods and computational intelligence TABLE I USED INDICATORS
based methods.
Indicator Name
Conventional methods are those created mainly by SMA Simple Moving Average
statistics and econometrics. In Atsalakis and K. P. Valavanis EMA Exponential Moving Average
[1] a broad study about these techniques is presented. ARMA BB Bollinger Bands
(autoregressive moving average models), ARIMA CO Chaikin oscillator
(autoregressive integrated moving average), ARCH and OCV Oscillator Chaikin Volatility
AD Accumulation and Distribution
GARCH models are the techniques of this group with better
OBV On Balance Volume
results [1]. WR Williams %R
RSI Relative Strength Index
Market methods can be divided in two types: fundamental S Stochastic
analysis and technical analysis [5]. In fundamental analysis, VO Volume Oscillator
the investor has parameters that define the company financial PO Price Oscillator
position, such as net profit, debt level, payment of dividends,
among others. In technical analysis, the main focus is the
stock value and the trade movement in a given period. These indicators were chosen because they represent the
four main groups of technical analysis indicators: trend
With regard to computational intelligence based methods, followers, oscillators, systems of bands and operators that act
the most used techniques employ neural networks and/or against the trend [5]. Besides, all of them can be obtained
fuzzy logic. In Atsalakis and K. P. Valavanis [2] it is shown a based on the values of the time series, stock price at market
review of 150 publications that use these techniques. In this opening or closing, maximum or minimum of the day and the
study, the authors demonstrate that computational systems financial volume traded.
usually show better results than conventional methods.
Genetic programming (Genetic Programming - GP) [3] has
also been used for this purpose. Up to the authors knowledge, B. Genetic Programming
[4] was the first reference to present a solid employment of In GoldMiner, each individual is composed of two decision
Genetic Programming to forecast the stock market. trees, one for buying and another for selling. The logical
Myszkowski P. B. [6] [7] also uses genetic programming for operators AND, OR, XOR and the indicators of technical
such a kind of prediction. In these references the authors made analysis presented in Table I are used to compose such
experiments on the Forex1 and on the Warsaw stock markets, individuals. Figure 1 shows an example of a buying decision
showing gains above the market. tree and picture 2, a selling decision tree.

III - PROPOSED TOOL

The proposed tool was inspired by studies carried out in
[7], in which genetic programming and technical market
analysis are combined. Four main features distinguish
GoldMiner from the system presented by Myszkowski P.B.:
the trading system, the verification system, the goal system
and the construction and parameterization of the GP. Using
these characteristics, GoldMiner is a computational system
that uses genetic programming with technical analysis to make
decisions and trade stocks in the stock market in an automated
way.

The features of the system are presented below. Figure 1 - buying decision tree

A. Technical Analysis
In GoldMiner, 12 indicators of technical analysis [5] were
used as shown in Table I. All of these indicators are explained
in reference [5].

1
Forex is an equity market that is characterized by high liquidity, a fact that
allowed Myszkowski P.B. [6] [7] to work with daily trading, also called Figure 2 - selling decision tree
Daytrade Operations.

398
 The initial population of the GP has been implemented
using the Grow method, the crossover by point and the shrink
mutation [3]. The selection is based on binary tournament.
The configuration and construction of the GP and the training
parameters are shown in Table II. The GP follows the steps of
an evolutionary algorithm, as follows:
1. Generate the initial population using the Grow
method.
2. Calculate the Fitness of the solutions.
3. Perform selection using binary tournament.
4. Apply the operators (mutation and crossover)
according to the given probabilities.
5. If he stop criterion is not met, return to step 2.
3. The selected individuals are tested on the
window tests I and II.
4. The individual with higher fitness and more than
20% return in window tests I and II is chosen to be
evaluated in the forecasting window.
5. If no individual meets the requirements described
in step 4, run the procedure again from a new initial
population generated in step 1.
The implementation of the verification system was
necessary because it was observed that individuals with best
fitness in the training phase can be very ineffective in the
forecasting window. The success rate has risen considerably
with the use of the verification system, reaching gains up to
30%.

TABLE II CONFIGURATION OF GP

Construction of the Tree Grow Method

Selection Method Tournament 2
Crossover 90%
Mutation 40% (Shrink)
Population 60
Fitness All (profit - losses)
Generation 10

The Fitness is calculated simply by counting the

profitability, i.e., all the profits subtracted from all losses.
Fitness = Sum of all profits - sum all losses

Each individual of the population can lead to three different

decisions: stay, sell or buy. These decisions are taken based on
the buying and selling decision trees, as shown in Table III. It
should be noticed that indicators of technical analysis do not
indicate the same action always, and situations just like the last
row of Table III may occur. Figure 3 window training, checking and forecast

TABLE III DECISION MAKING FOR BUYING AND SELLING D. Trading System and Goals
Buying Decision Tree Selling Decision Tree Action The core of a system that buys and sells stocks on the
False False Stay stock exchange can be divided in two key modules: (i)
True False Buy
False True Sell decision module and (ii) trading module. The decision module
True True Stay is responsible for making decisions that, in the case of
GoldMiner, are guided by two decision trees (buying and
selling trees). The second module addresses how the
C. Verification System negotiation will be executed. It is responsible for selling,
buying or performing shutdown operations.
As stated earlier, GoldMiner differs from studies carried
out by Myszkowski P.B. [7] in four specific points: the The trading module that was built has four characteristics:
targeting system, the system of trading on the stock exchange, It makes use of rented stocks.
the system of prior check solutions and parameterization of
the GP. In Figure 3, the windows of training, checking and It leverages the capital once the value of available assets.
forecasting are presented. It buys and sells on the closing price of the market.
It uses a target profit of 10% as stop condition.
The verification system was created in order to improve
the hit rate. Its operation consists on the following steps: The rented stocks can be traded without necessarily being
owned. This type of operation is a practice in the stock market
1. Evolve the population in the training window. called short selling [5].
2. After the training, ten individuals with the best
fitness are selected.

399
 Another common practice in the stock market is to
leverage [5] in purchase and sale transactions. In finance,
leverage is a general term for any technique applied to
multiply the profitability through debt. The leverage also
increases the operation risks. GoldMiner works leveraging the
stocks by once.
validation and prediction were performed in the range of T =
30 on 02-24-2010 until T = 1026 on 02-28-2014.
Table V presents the intervals of training, checking and
prediction windows.
TABLE V TRAINING WINDOW, VERIFICATION AND FORECASTING

Window Work Time

Another feature of the trading system is the moment of Window check I T=30 to T=280
buying and selling the stocks. The system works with day Window check II T=281 to T=529
candles [5], and operations are done at market close. This Window training T=530 to T=777
decision was taken due to the high liquidity [5] of the stock Forecasting window T=778 +N to T=1026 N=0,2,4,6... to 60
exchange at the closing of the day.

It has been set that when GoldMiner reaches a profit of The starting date of the forecast window was added by two
10%, then the operations are closed. This profit is compatible days each test, and it was repeated 30 times. This variation in
with the Brazilian economy. The profitability of the Brazilian the forecast window aimed to test the consistency and
government bonds ranged between 8% and 10% annually, robustness of the results achieved by GoldMiner.
considering the forecast from 2013 to early 2014 [11]. The
system aims to return at least 10% of profit on a maximum of V-RESULTS
one hundred and ninety days. In Figure 4 and Table VI it can be observed the operation
of the trade system. Decisions to buy, sell and close for
BOVA112 stock are presented.
IV. INSTANCES AND TESTS
Myszkowski P. B. [7] proposed a software that operates
primarily with daytrade operations [5] in a strong liquidity
market. This fact enables that predictions and negotiations are
carried out at intervals of 5, 10 and 15 minutes. However, on
the BOVESPA, even for top stocks (so-called Blue Chips), any
forecasting system to daytrade operations should consider book
offerings. Indications to buy or to sell a stock at a given
moment can be executed only if there are interested buyers and
sellers available. Therefore, although BOVESPA liquidity is
not critical as in other markets (i.e. Forex), there are two
moments on the day in which buying and selling indications of
blue chips can be executed with high probability: one hour
after the market opening and at the final 30 minutes [8]. This
aspect justified the choice for day candles in GoldMiner, in
which the transactions are performed at the close of market.
Up to now, the GP was tested on BOVESPA with four
stocks, namely BOVA11 VALE5, PETR4 and BBSA3. These
stocks have been selected because they have representation in
BOVESPA index and they present liquidity for being bought
and sold in day candles. In Table IV, a brief description of each
of them is shown. Figure 4 BOVA11, example of the trading system

TABLE IV CODES OF TRADED STOCKS.

TABLE VI EXAMPLE OF THE TRADE SYSTEM WITH BOVA11
Code of the Description
stock
BOVA11 follows BOVESPA index Step Market Initial Final Evolution of Cash on
VALE5 Stocks of Vale SA - site http://www.vale.com Price Position Position Assets Hand
PETR4 Stocks of the company Petrleo Brasileiro SA-
http://www.petrobras.com.br
BBSA3 Stocks of the company - Bank of Brazil SA - 1 R$ 57,15 Stop Sold R$ 1.000,00 R$ 2.000,00
http://www.bb.com.br

Technical analysis uses the time series of a particular stock

as input. Each element is composed of Date, Open Value,
Maximum Day, Minimum Day, Closing Value and Negotiated
Volume. To perform the experiment, GoldMiner used the same
time interval for the four stocks mentioned. The training,
2
BOVESPA Index is a market index that measures the return on an
investment in a theoretical portfolio calculated by BM & FBOVESPA,
composed of stocks issued by companies that account for over 80% of the
number of trades and of the financial volume verified in the cash market
(standard batch) of BM & FBOVESPA.

400
 BOVA11 30 27 90% 53,83 days
2 R$ 54,86 Sold Bought R$ 1.040,50 R$ 0,00 PETR4 30 28 93,33% 55,76 days
VALE5 30 27 90% 33,56 days
BBAS3 30 29 96,66% 80,93 days
3 R$ 54,15 Bought Sold R$ 1.026,60 R$ 2.053,00
Boxplot graphs with details about these results can be seen
in Figures 5 and 6. They present the financial returns of the
4 R$ 51,95 Sold Bought R$ 1.067,57 R$ 0,00
stocks and the time required to obtain these returns.
In Figure 5, the variation of the intervals is minimal since
5 R$ 53,69 Bought Stop R$ 1.103,32 R$ 1.130,32
when the profitability reaches 10%, the operations are
terminated. Since the buying and selling operations are
It is important to emphasize that operating costs, rental conducted at market closing, most part of the profits are
costs and fractioning batch were not considered in this work. slightly above 10%. The outliers in Figure 5 also indicate that
It is expected to include such features in future versions of GoldMiner did not reach the set target. In the case of VALE5,
GoldMiner. In general, the rental price of a stock can vary it has been observed loss in some runs.
from 1% to 5% of its value. In the specific case of BOVA11,
the rent value for the period of the operations was 2.5% per
year [8].

Buying and Selling Rules:

An example of the application of optimal buying and

selling rules on the market can be seen in Table VI. From this
example.

Step 1 - On 03-08-2013, the initial capital was R$

1,000.00. The system indicates sale at stock price of R$ 57.15.
After rent and sale of the stock, there is R$ 2,000.00 in cash
and 17.49 stocks.

Step 2 - On 03-20-2013, the system indicates a purchase

with the stock price of R$ 54.86. A total of 36.54 stocks are
purchased, registering a surplus of 18.96 stocks with $0.00 in
cash. The assets increases to R$ 1,040.50. Figure 5 Financial return with GoldMiner to four top stocks.

Step 3 - On 04-11-2013, the system indicates a sale with

the stock price of R$ 54.15. The sale of 37.92 stocks is done,
registering a deficit of -18.96 stocks and R$ 2,053.00 in cash.
The assets decreases to R$ 1,026.60.

Step 4 - On 04-14-2013, the system indicates a purchase

at a stock price of R$ 51.95. The purchase of 39.51 stocks is
done and it a surplus of 20.55 stocks is registered, with $ 0.00
in cash. The assets increases to R$ 1,067.57.

Step 5 - Finally, on 04-23-2013, the system indicates a

sale and the GoldMiner reaches the goal profit of 10%. In this
case, the initial capital is increased from R$ 1,000.00 to R$
1,103.32 within 32 days.

The results obtained with GoldMiner are shown in Table

Figure 6 Time to obtain financial return.
VII. It can be seen that the target was hit in at least 90% of the
tests. As explained earlier, reaching the goal means getting a
In general, the outliers on Figure 6 indicate that the goal
return above 10% in 190 days or less.
was not reached within 190 days. However, some outliers
lower than 190 days have been obtained for PETR4 stock.
TABLE VII CONSOLIDATED RESULTS
The efficiency of the proposed system has been compared
Stock Runs Suc. Ratio Average with the Buy and Hold Strategy [5]. The Buy and Hold
Runs return
time
Strategy states that the best way to form a portfolio of stock

401
investments is to buy assets with positive history and keep VALE5 -1,88 9,21
these stocks for an indefinite period of time. BBAS3 5,12 10,77
Table VIII presents some of the results obtained with
BOVA11 stocks in the Buy and Hold strategy compared to the
results obtained with GoldMiner. The observed results indicate that the proposed algorithm is
able to reach good profit in several situations, being this
strategy considerably better than the Buy and Hold strategy. In
TABLE VIII - BUY AND HOLD VERSUS GOLDMINER TO BOVA11 addition, it was possible to obtain such profit in very short time
on the considered stocks.
Days Buy and GoldMiner Window Forecasting
Hold training window
VI - CONCLUSION
31 -6.45 10.00 530-777 778-1020
In this work, GoldMiner, a decision-making and trading
29 -6.98 10.00 530-777 780-1020 algorithms for the stock market is presented. This system uses
62 -11.93 11.53 530-777 782-1020 genetic programming combined with indicators of financial
technical analysis. The application identifies the time of
62 -17.18 11.33 530-777 784-1020
purchasing and selling stocks, considering the liquidity of the
60 -14.02 11.33 530-777 786-1020 market when it is ner to close.
58 -11.79 11.33 530-777 788-1020 This software was tested on BOVESPA with four top
stocks in different time windows. Initial results are promising;
the target time and profity were reached in more than 90% of
56 -11.98 11.33 530-777 790-1020
the runs.
The combination of genetic programming with technical
54 -11.42 11.33 530-777 792-1020 analysis has previously been treated in the literature, but the
inclusion of the two windows of verification and the trading
52 -9.43 11.33 530-777 794-1020 system features a key distinguishing point for reaching the
results of this work.

50 -11.33 11.62 530-777 796-1020 ACKNOWLEDGEMENTS

48 -11.33 11.47 530-777 798-1020 The authors would like to thank the Brazilian agencies
CAPES, CNPq and FAPEMIG by the financial support.
46 -10.58 11.47 530-777 800-1020
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BOVA11 -9,69 10,15 [11] http://www.bcb.gov.br
PETR4 -9,37 10,94

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