Recurrent Neural Network for Stock forecasting

Overview

Teaching: 20 min
Exercises: 0 min

Questions

How to train a RNN model with Keras

Objectives

how to apply RNN model

Recurrent Neural Networks

Introduction

RNNs are type of Deep Learning models with built-in feedback mechanism.
The output of a particular layer can be re-fed as the input in order to predict the output.

source

A look at detailed when we unroll the RNN loop:

Types of RNN

Applications

It is specifically designed for Sequential problem Weather forecast, Stock forecast, Image captioning, Natural Language Processing, Speech/Voice Recognition

Some Disadvantages of RNN:

Computationally Expensive and large memory requested
RNN is sensitive to changes in parameters and having Exploding Gradient or Vanishing Gradient
In order to resolve the gradient problem of RNN, a method Long-Short Term Memory (LSTM) is proposed.

In this limited workshop, we only cover LSTM for timeseries forecast problem.

Long-Short Term Memory model - LSTM

Introduction

LSTMs are a special kind of RNN — capable of learning long-term dependencies by remembering information for long periods is the default behavior.
They were introduced by Hochreiter & Schmidhuber (1997) and were refined and popularized by many people
LSTMs are explicitly designed to avoid the long-term dependency problem.

Comparison between traditional RNN and LSTM

Step by step walkthrought LSTM:

Link

Hands-on exercise on application of LSTM in Stock forecasting

Here, we will access Keras LSTM to forecast the closing stock price given the information of its volume

Stock data

Here we use a sample Microsoft stock downloaded from yahoo finance
Data consists of daily stock from certain time frame with Closing, Opening, Volume of stocks
Temporal timeframe 4 years since 01/01/2018
Input variables: Daily closing stock price and its volume
Output or target variable: Closing stock price at later date

Objective

Using data from previous 30 days, forecast closing price the next day

Library requested:

Other than tensorflow.keras installed in previous workshop, we need additional library:

!pip install pandas_datareader yfinance

Loading library:

import numpy as np
import seaborn as sns
import pandas as pd

import matplotlib.pyplot as plt

# For reading stock data from yahoo finance, install if needed
from pandas_datareader.data import DataReader
import yfinance as yf

# For time stamps
from datetime import datetime

import tensorflow.keras as keras

Define stock, starting date and import:

# The stock we use here is Microsoft (MSFT) but feel free to use any other ticker.
stock = "MSFT"
start_date = '2018-01-01'
end_date = datetime.now()

# Get the stock quote starting at certain date until current time
df = DataReader(stock, data_source='yahoo', start=start_date, end=end_date)

	         High	      Low	      Open	      Close	      Volume	   Adj Close
Date						
2018-01-02	86.309998	85.500000	86.129997	85.949997	22483800.0	81.530235
2018-01-03	86.510002	85.970001	86.059998	86.349998	26061400.0	81.909653
2018-01-04	87.660004	86.570000	86.589996	87.110001	21912000.0	82.630577
2018-01-05	88.410004	87.430000	87.660004	88.190002	23407100.0	83.655052
2018-01-08	88.580002	87.599998	88.199997	88.279999	22113000.0	83.740417
...	...	...	...	...	...	...
2022-04-01	310.130005	305.540009	309.369995	309.420013	27085100.0	309.420013
2022-04-04	315.109985	309.709991	310.089996	314.970001	24289600.0	314.970001
2022-04-05	314.869995	309.869995	313.269989	310.880005	23156700.0	310.880005
2022-04-06	307.000000	296.709991	305.190002	299.500000	40058900.0	299.500000
2022-04-07	303.649902	296.359985	296.660004	302.839996	22547999.0	302.839996
1075 rows × 6 columns

Plotting heatmap:

sns.pairplot(df)

We can see that Closing price has very good correlation with High/Low/Open so in order to avoid colinearity, we choose only Closing Price and Volume as input for our RNN:

fig = plt.figure(figsize=(12,12))
ax1 = fig.add_subplot(111)
ax1.plot(df['Close'],color='red',label="Closing price")
ax2 = ax1.twinx()
ax2.bar(df.index,df['Volume']/10**6,label="Volume")
ax2.grid(False)
plt.title("Daily Closing stock price and its volume of " + stock)
plt.xlabel("Date")
ax1.set_ylabel("Closing price (US$)")
ax2.set_ylabel("Volume (million)")
fig.legend(loc="upper right", bbox_to_anchor=(1,1), bbox_transform=ax1.transAxes)
plt.show()

# Create a new dataframe with only the 'Close' and 'Volume' 
df = df.filter(['Close','Volume'])

Setting up parameters

Data was collected at daily interval.
Using historical data of 30 days in the past: = 30 data points
To forecast stock the subsequent day = 1 data points
Data partition to 80% training and 20% testing in order of time
For Neural Network, following parameters are pre-selected:
- Learning rate = 0.001
- Batch size = 24 (Batch size is the number of samples that usually pass through the neural network at one time)
- Epoch = 50 (Epoch is the number of times that the entire dataset pass through the neural network)

split_fraction = 0.8
train_split = int(split_fraction * int(df.shape[0]))

step = 1 
past = 30

batch_size = 24
epochs = 50
learning_rate=0.001

Standardized data:

As input data has different range, so there would be the need for standardization

from sklearn.preprocessing import MinMaxScaler
scale = MinMaxScaler(feature_range=(0,1))
scaled_features = pd.DataFrame(scale.fit_transform(df))
scaled_features.columns = df.columns
scaled_features.index = df.index

# The split of training and testing data must follow the sequential
train_data = scaled_features[0:train_split]
test_data =  scaled_features[train_split:]

train_data.head()

	         Close	   Volume
Date		
2018-01-02	0.003642	0.131973
2018-01-03	0.005192	0.166961
2018-01-04	0.008136	0.126381
2018-01-05	0.012321	0.141002
2018-01-08	0.012669	0.128346

Data partitioning

Selecting input/output for training/testing dataset:

Training

start_ytrain = past
end_ytrain = train_split + start_ytrain

x_train = train_data
y_train = scaled_features[start_ytrain:end_ytrain]["Close"]

sequence_length = int(past/step)

Testing

start_ytest = end_ytrain
end_ytest = len(test_data) - past

x_test = test_data.iloc[:end_ytest,:]
y_test = scaled_features.iloc[start_ytest:]["Close"]

Validation

valid_data = scaled_features.iloc[train_split - past: , :]
valid_data = np.array(valid_data)

x_valid = []
for i in range(past, len(valid_data)):
    x_valid.append(valid_data[i-past:i,:])

x_valid = np.array(x_valid)

Using Keras to split training/testing data to different batch:

Here, we utilize the preprocessing time series feature of keras to split training/testing data into different batch:

Training

dataset_train = keras.preprocessing.timeseries_dataset_from_array(
    x_train,
    y_train,
    sequence_length=sequence_length,
    sampling_rate = step,
    batch_size=batch_size,
)

for batch in dataset_train.take(1):
    inputs, targets = batch

print("Input shape:", inputs.numpy().shape)
print("Target shape:", targets.numpy().shape)

Testing

dataset_test = keras.preprocessing.timeseries_dataset_from_array(
    x_test,
    y_test,
    sequence_length=sequence_length,
    sampling_rate=step,
    batch_size=batch_size
)

for batch in dataset_test.take(1):
    inputs_test, targets_test = batch

print("Input shape:", inputs_test.numpy().shape)
print("Target shape:", targets_test.numpy().shape)

Build Deep learning model with LSTM framework:

inputs = keras.layers.Input(shape=(inputs.shape[1], inputs.shape[2]))
lstm_out = keras.layers.LSTM(64, activation="relu")(inputs)
outputs = keras.layers.Dense(1)(lstm_out)

model = keras.Model(inputs=inputs, outputs=outputs)
model.compile(optimizer=keras.optimizers.Adam(learning_rate=learning_rate), loss="mse")
model.summary()

Model: "functional_1"
_________________________________________________________________
Layer (type)                 Output Shape              Param #   
=================================================================
input_1 (InputLayer)         [(None, 30, 2)]           0         
_________________________________________________________________
lstm (LSTM)                  (None, 64)                17152     
_________________________________________________________________
dense (Dense)                (None, 1)                 65        
=================================================================
Total params: 17,217
Trainable params: 17,217
Non-trainable params: 0
_________________________________________________________________

Train the LSTM model and vaidate with testing data set:

history = model.fit(
    dataset_train,
    epochs=epochs,
    validation_data=dataset_test,
    verbose=2
)

Visualize the Training & Testing loss with 50 different epoches?

def visualize_loss(history, title):
    loss = history.history["loss"]
    val_loss = history.history["val_loss"]
    epochs = range(len(loss))
    plt.figure()
    plt.plot(epochs, loss, "b", label="Training loss")
    plt.plot(epochs, val_loss, "r", label="Validation loss")
    plt.title(title)
    plt.xlabel("Epochs")
    plt.ylabel("Loss")
    plt.legend()
    plt.show()

visualize_loss(history, "Training and Validation Loss")

Evaluation with Forecasting

y_pred = model.predict(x_valid)

#Create transformation function to rescale back to original
scaley = MinMaxScaler(feature_range=(0,1))
scaley.fit_transform(pd.DataFrame(df.iloc[:,0]))
y_pred = scaley.inverse_transform(y_pred)

Plot the data

train = df[:train_split]
valid = df[train_split:]
valid['Predictions'] = y_pred
# Visualize the data
plt.figure(figsize=(16,6))
plt.title(stock + ' price prediction')
plt.xlabel('Date', fontsize=18)
plt.ylabel('Close Price USD ($)', fontsize=18)
plt.plot(train['Close'])
plt.plot(valid[['Close', 'Predictions']])
plt.legend(['Train', 'Val', 'Predictions'], loc='lower right')
plt.show()

For batch predictions:

def show_plot(plot_data, title):
    labels = ["History", "True Future", "Model Prediction"]
    marker = [".-", "rx", "go"]
    time_steps = list(range(-(plot_data[0].shape[0]), 0))
    

    plt.title(title)
    for i, val in enumerate(plot_data):
        if i:
            plt.plot(0, plot_data[i], marker[i], markersize=10, label=labels[i])
        else:
            plt.plot(time_steps, plot_data[i].flatten(), marker[i], label=labels[i])
    plt.legend()
    plt.xlabel("Time-Step")
    plt.ylabel("Closing cost US$()")
    plt.show()
    return

# Scale the data
scaleT = MinMaxScaler(feature_range=(0,1))
scaleT.fit_transform(pd.DataFrame(df[:]))

for x, y in dataset_test.take(8):
    show_plot(
        [scaley.inverse_transform(pd.DataFrame(x[0][:, 0])),
         scaley.inverse_transform(pd.DataFrame(pd.Series(y[0].numpy()))),
         scaley.inverse_transform(pd.DataFrame(model.predict(x)[0]))],         
        "Single Step Prediction",
    )

Save model

model.save('Stock_prediction_MSFT.keras')

Load the save model and predict tomorrow closing price for stock

model1 = keras.models.load_model('Stock_prediction_MSFT.keras')

Load new data:

stock = "MSFT"
start_date = '2018-01-01'
end_date = datetime.now()
df = DataReader(stock, data_source='yahoo', start=start_date, end=end_date)

Retain the last 30 data for prediction

df = df.tail(30).filter(["Close","Volume"])

Scale data

from sklearn.preprocessing import MinMaxScaler
scale = MinMaxScaler(feature_range=(0,1))
X = pd.DataFrame(scale.fit_transform(df))

scaley= MinMaxScaler(feature_range=(0,1))
scaley.fit_transform(df[["Close"]])

Reshape input data:

X = np.array(X).reshape(1,X.shape[0],X.shape[1])

Predict:

y=model.predict(X)
print("Predicted Closing price tomorrow for ", stock, "is", scaley.inverse_transform(pd.DataFrame(y)), "$")

Show predicted plot:

show_plot(
        [scaley.inverse_transform(pd.DataFrame(X[0])),
         scaley.inverse_transform(pd.DataFrame(y)),
         scaley.inverse_transform(pd.DataFrame(y))],         
        "Single Step Prediction")

Key Points

RNN, LSTM, keras

previous episode

Introduction to Deep Learning using Python Keras

lesson home

Recurrent Neural Network for Stock forecasting

Overview

Recurrent Neural Networks

Introduction

Types of RNN

Applications

Some Disadvantages of RNN:

Long-Short Term Memory model - LSTM

Introduction

Comparison between traditional RNN and LSTM

Step by step walkthrought LSTM:

Hands-on exercise on application of LSTM in Stock forecasting

Stock data

Objective

Library requested:

Loading library:

Define stock, starting date and import:

Setting up parameters

Standardized data:

Data partitioning

Selecting input/output for training/testing dataset:

Training

Testing

Validation

Using Keras to split training/testing data to different batch:

Training

Testing

Build Deep learning model with LSTM framework:

Train the LSTM model and vaidate with testing data set:

Visualize the Training & Testing loss with 50 different epoches?

Evaluation with Forecasting

Plot the data

For batch predictions:

Save model

Load the save model and predict tomorrow closing price for stock

Key Points

previous episode

lesson home