INTRODUCTION TO FINANCIAL FORECASTING

This paper provides a brief introduction to forecasting in financial m arkets with emphasis on commodity futures and foreign exchange. We des cribe the basic approaches to forecasting, and discuss the noisy natur e of financial data. Using neural networks as a learning paradigm, we describe different techniques for choosing the inputs, outputs, and er ror function. We also describe the learning from hints technique that augments the standard learning from examples method. We demonstrate th e use of hints in foreign-exchange trading of the U.S. Dollar versus t he British Pound, the German Mark, the Japanese Yen, and the Swiss Fra nc, over a period of 32 months. The paper does not assume a background in financial markets.