This document describes building an ARIMA model to forecast 10 days of NIFTY closing points in order to profit from trading. It collects NIFTY data from 2018-2019, checks for stationarity and differencing, builds ARIMA models with different parameters, selects the best model of ARIMA(1,1,10), uses it to forecast 10 days ahead, and backtests a trading strategy of buying on predicted uptrends and short selling on downtrends, finding it made money 7 out of 10 times.

2. OBJECTIVE:
DATA COLLECTION:
• To forecast 10 days of
NIFTY Closing Points and
make Money out of it.
• Data is collected from NSE
official website.
• NIFTY values between
01-Apr-2018 to 31-Mar-2019.
• 248 Trading days.
DATA VISUALIZATION:

3. UNDERSTANDING
AND
PRE-PROCESSING THE DATA

4. TEST FOR STATIONARITY:
• DATA IS NOT STATIONARY.
DECOMPOSING THE DATA:
TACKLING WITH SEASONALITY:
• DESEASONALIZE THE DATA.
• TO BE USED FOR TRAINING THE MODEL.
DIFFERENCING DESEASONALIZED DATA:
• FIRST DIFFERENCE DATA
IS STATIONARY.

5. BUILDING
AND
TRAINING THE MODELS

6. SEARCH FOR PARAMETERS OF ARIMA viz. (p,d,q)
WITHOUT DIFFERENCING: WITH FIRST DIFFERENCE:
• Suggests q = 10
• d = 1 , already

7. AUTO-ARIMA MODEL
• STILL SOME JUICE LEFT IN THE 10th LAG.
ANALYSIS OF RESIDUALS:
APPLY MODEL WITH
BRINGING SEASONALITY
BACK IN:
• AIC = 2861.36
• BIC = 2864.73

8. ARIMA (1,1,10) MODEL
• AUTO-CORRELATIONS ARE UNDER CONTROL.
• NOT MUCH JUICE IS LEFT.
ANALYSIS OF RESIDUALS:APPLY MODEL WITH
BRINGING SEASONALITY
BACK IN:
• AIC = 2860.83
• AIC OF THIS MODEL IS LESS
• SO WE CHOOSE MODEL (1,1,10)

9. FORECAST 10 AHEAD

10. ARIMA (1,1,10) MODEL
FORECASTING FOR 10 AHEAD VALUES:

11. Let’s Trade!

12. STRATEGY?
FOR FORECASTED UP TREND: BUY AND SELL
FOR FORECASTED DOWN TREND: SHORT SELL

13. DATE FORECASTED
VALUES
FORECASTED
TREND
STRATEGY ACTUAL
VALUES
ACTUAL
TREND
PROFIT/
LOSS
01-APR-19 11653.14 UP BUY 11669.15 UP
02-APR-19 11661.52 UP BUY 11713.20 UP
03-APR-19 11674.41 UP BUY 11643.95 DOWN
04-APR-19 11666.13 DOWN SHORT SELL 11598.00 DOWN
05-APR-19 11685.74 UP BUY 11665.95 UP
08-APR-19 11665.55 DOWN SHORT SELL 11604.50 DOWN
09-APR-19 11662.42 DOWN SHORT SELL 11671.95 UP
10-APR-19 11605.70 DOWN SHORT SELL 11584.30 DOWN
11-APR-19 11654.98 UP BUY 11596.70 UP
12-APR-19 11651.18 DOWN SHORT SELL 11643.45 UP
EX-POST RESULTS OF INTRA-DAY TRADING:

14. MADE MONEY 7
OUT OF 10
TIMES USING THE
MODEL.
NOT A BAD DEAL
AT ALL!

15. THANK YOU!