Sunday, 22 September 2013

Savitzky-Golay Filters in Action

As a first step in investigating SG filters I have simply plotted them on samples of my idealised time series data, three samples shown below:
where the underlying "price" is cyan, and the 3rd, 4th, 5th, 6th and 7th order SG fits are blue, red, magenta, green and yellow respectively. As can be seen, 5th order and above perfectly match the underlying price to the extent that the cyan line is completely obscured.

Repeating the above on real prices (ES-mini close) is shown in the video below:
video
Firstly, the thing that is immediately apparent is that real prices are more volatile than my idealised price series, a statement of the obvious perhaps, but it has led me to reconsider how I model my idealised price series. However, there are times when the patterns of the SG filters on real prices converge to almost identically resemble the patterns of SG filters on my idealised prices. This observation encourages me to continue to look at applying SG filters for my purposes. How I plan to use SG filters and modify my idealised price series will be the subject of my next post.

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