Saturday 8 May 2010

Monte Carlo Optimisation of Control Limits #6

I have now run the Monte Carlo tests of the boundary limits. The test consisted of 3000 phase randomised sine waves per period for constant periods 10 to 50 inclusive. The amplitudes of the sine waves were also randomised, up to a maximum of 20 (20*rand). This makes a total of 123,000 random sine waves. Any time the peak or trough of a sine wave occured above the resistance zone or below the support zone this was recorded. Similarly if the peak or trough of a sine wave occured between these zones without penetrating or touching them this was separately recorded. There were 683 instances (0.56 % of total runs) that peaked/troughed outside the zones, and 379 instances (0.31 %) that peaked/troughed completely within the zones without actually touching them. All of the above 683 instances occured at period 13, whilst the 379 instances were split 265/114 between periods 10/14.

Looking at the plot from post #4 it is obvious why all the failures are concentrated at the low periods, as this is the area where the plot shows most variation in the range of the multipliers. I have therefore decided that the optimised ucl and lcl multipliers that were tested in this test shall apply only to periods less than 15 in the final indicator. I shall repeat the MC test with new ucl and lcl optimised boundary multipliers for periods 15 to 50 inclusive.

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