What are Point and Figure Charts?
Point and Figure charts are a way of plotting the movement of share prices in such a way as to remove the effect of the noisy variations and just leave the important information. They were developed in the years before computers made chart plotting and interpreting easier as a quick method of tracking the stock market. Although their popularity declined when computers became common, there has recently been a renewal of interest in them.
One thorny issue with neural networks is that the inputs need to be coded properly in order that the network can extract useful information from them. For instance, training the network simply on the share prices themselves would be unsatisfactory, as that particular pattern of prices would depend on the absolute value of the stock market. In many cases, the obvious strategy is the correct one, and in the case of stock market prediction an obvious strategy suggests itself. It is not the absolute value of the stock prices that is of interest, but the changes in prices from one time period to the next. This is where the money is to be made, regardless of whether the general value of shares is hovering around the 4000 mark, the 5000 mark or the 6000 mark. For this reason, it would make more sense for the inputs to the ANN to be the changes in share price.