Traders' Behavior Effect on Stock Price Evolution

Abstract

Traders behavior can influence the evolution of thestock price movement due to their ability to use the information of some internal and external factors to place an order on the market. The goal of this paper is to create an expert system that simulates the behavior and the reaction of informed and noise traders in order to better understand the effect of the traders and how we can minimize the effect of noise traders on the market.We proposed an expert system that uses rule based techniques in order to describe the behavior of informed and noise traders to any kind of news, historical data and the external information.The system makes a correlation between the traders behavioron a given moment and the information that is known at thatparticular moment. It also describes the type of traders and how they usually act on the market. It is important to know that a trader can learn on the market and can change their status and their behavior. We developed a prototype in order to simulate the movement and evolution of traders behavior on the market and also to classify and quantify the effect of traders behavior on the stock price movement.