## Thursday, 18 October 2018

### A Bull Bear Background Plotting Function for Octave

As part of my recent research I have found it convenient to write another custom plotting function for Octave, which plots a single line price plot against a conditionally coloured background, e.g. two separate colours for bull and bear market regimes.

Being able to plot like this avoids the necessity to keep flipping between two separate charts to compare the plot of a potential input feature and a plot of price. So, without further ado, here is the code for the function:
## Copyright (C) 2018 dekalog
##
## This program is free software; you can redistribute it and/or modify it
## under the terms of the GNU General Public License as published by
## the Free Software Foundation; either version 3 of the License, or
## (at your option) any later version.
##
## This program is distributed in the hope that it will be useful,
## but WITHOUT ANY WARRANTY; without even the implied warranty of
## MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
## GNU General Public License for more details.
##
## You should have received a copy of the GNU General Public License
## along with this program.  If not, see .

## -*- texinfo -*-
## @deftypefn {} {@var{retval} =} bull_bear_background_plot (@var{price}, @var{condition})
##
## Plots price with different, vertically coloured background stripes, according
## to the integer values 1, 2... etc contained in condition.
##
## see https://web.njit.edu/~kevin/rgb.txt.html for colour codes
##
## @seealso{}
## @end deftypefn

## Author: dekalog
## Created: 2018-10-17

function [retval] = bull_bear_background_plot ( price , condition )

% if price is a row vector, change it to a column vector
if ( size( price , 1 ) == 1 && size( price , 2 ) > 1 )
price = price' ;
endif

up_lim = max( price ) ; low_lim = min( price ) ;
x = [ 1 : size( price , 1 ) ]' ;
y = unique( condition ) ;

ix1 = find( condition == y(1) ) ; color1 = [ 173 216 230 ] ./ 255 ; % LightBlue
ix2 = find( condition == y(2) ) ; color2 = [ 255 228 225 ] ./ 255 ; % MistyRose

if ( low_lim >= 0 ) % all prices are positive; normal for a price chart

bar( x(ix1) , ones(size(ix1)).*(1.05*up_lim) , 1 , 'facecolor' , color1 , 'edgecolor' , color1 ) ; hold on ;
bar( x(ix2) , ones(size(ix2)).*(1.05*up_lim) , 1 , 'facecolor' , color2 , 'edgecolor' , color2 ) ;
plot( price , 'k' , 'linewidth' , 2 ) ; axis([min(x),max(x),0.95*low_lim,1.05*up_lim]) ; grid minor on ; hold off ;

elseif ( up_lim > 0 && low_lim &lt; 0 ) % plotting an ocscillator around a zero line
% or perhaps some negative back-adjusted prices

bar( x(ix1) , ones(size(ix1)).*(1.05*up_lim) , 1 , 'facecolor' , color1 , 'edgecolor' , color1 ) ; hold on ;
bar( x(ix1) , ones(size(ix1)).*(1.05*low_lim) , 1 , 'facecolor' , color1 , 'edgecolor' , color1 ) ; ;
bar( x(ix2) , ones(size(ix2)).*(1.05*up_lim) , 1 , 'facecolor' , color2 , 'edgecolor' , color2 ) ;
bar( x(ix2) , ones(size(ix2)).*(1.05*low_lim) , 1 , 'facecolor' , color2 , 'edgecolor' , color2 ) ;
plot( price , 'k' , 'linewidth' , 2 ) ; grid minor on ; hold off ;

elseif ( up_lim &lt; 0 ) % all prices are negative

bar( x(ix1) , ones(size(ix1)).*(1.05*low_lim) , 1 , 'facecolor' , color1 , 'edgecolor' , color1 ) ; hold on ;
bar( x(ix2) , ones(size(ix2)).*(1.05*low_lim) , 1 , 'facecolor' , color2 , 'edgecolor' , color2 ) ;
plot( price , 'k' , 'linewidth' , 2 ) ; axis([min(x),max(x),1.05*low_lim,0.95*up_lim]) ; grid minor on ; hold off ;

endif

endfunction

and here is what a plot looks like:
with the light blue background highlighting an uptrend and the MistyRose highlighting a downtrend in the black sine wave plot. At the moment the function is not very polished and is hard coded for only these two colours, but it would be a trivial task to extend its functionality to more than two conditions and have the colours as a user input. However, this is low down on my list of priorities at the moment. I hope readers who use Octave as I do find this function useful.

## Thursday, 11 October 2018

### "Black Swan" Data Cleaning

Since my last post I have been investigating training features that can be derived from my Currency Strength indicator as input for machine learning algorithms and during this work it was obvious that there are instances in the raw data that are Black Swan outliers. This can be seen in the chart below as pronounced spikes.
The chart itself is a plot of log returns of various forex crosses and Gold and Silver log returns, concatenated into one long vector. The black is the actual return of the underlying, the blue is the return of the base currency and the red is the cross currency, both of these being calculated from indices formed from the currency strength indicator.

By looking at the dates these spikes occur and then checking online I have flagged four historical "Black swan" events that occured within the time frame the data covers, which are listed in chronological order below:
1. Precious metals price collapse in mid April 2013
2. Swiss Franc coming off its peg to the Euro in January 2015
3. Fears over the Hong Kong dollar and Renminbi currency peg in January 2016
4. Brexit black Friday
The next series of charts shows the progressive reduction in the number of spikes as the data around the above events is deleted from those crosses etc. that were affected.

It can be seen that the final chart shows much more homogeneous data within each concatenated series, which should have benefits when said data is used as machine learning input. Also, the data that has been deleted will provide a useful, extreme test set to stress test any finished model. More in due course.