Sunday 20 June 2010

Update on recent efforts #4

MC testing on the slope of the repeated median straight line fit is now complete. Normalising the optimal length look back slope of a sine wave by its amplitude ( slope/(max-min)values of sine wave ) gives a ratio. A ratio distribution has a tendency to be heavy tailed (wiki/Ratio_distribution) and as quantiles are "useful measures because they are less susceptible to long-tailed distributions and outliers" I have simply used R to calculate quantiles and determined outliers to be 1.5 * IQR above and below Q3 and Q1.

By using this "new" measure of cyclic tendency the intent/hope is that prices can be said the be trending or going sideways dependent upon whether the normalised slope is outside of, or between, the levels calculated above. This idea, along with the others previously detailed, will be tested on real world data very soon. The details of this testing and a discussion of the rationale of the intended system input will be the subject of my next posting.

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