Some new ideas for your next trading system - page 4
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Idea 12: a trading system based on musical intervals and frequency ratios to play the music of the market (by figurelli)
What is the music of the market? Can we create a model to connect prices movements to musical tones?
I think so, and the idea here is use musical intervals and frequency ratios, some of them based on Pythagoras ideas, such as the Pythagorean Interval, and support/resistance of the instruments, to build a trading system strategy based on main tone harmony, that we call as the music of the market, as a metaphor, of course.
First of all, let's study more about music theory and the property of a stretched string and musical intervals, to figure out our main frequency ratios.
"Music was numbered by the ancients among the arts that are called liberal, that is, worthy of a free man, and among the Greeks its masters and discoverers, like those of almost all the other sciences, were always in great esteem. And by the best legislators it was decreed that it must be taught, not only as a lifelong delight but as useful to virtue, to those who were born to acquire perfection and human happiness, which is the object of the state.
To make a sound you need something that vibrates. and if you want to make musical notes, you need the vibration to have an almost constant frequency. The controlled vibration is produced by a standing wave of a stretched string. Due to it's elastic properties, the string oscillates back and forth between two gentle curves. If the length is cut in half, say by touching the string gently at its midpoint, each half will ring at twice the original frequency, or an interval of an octave above the fundamental. By touching the string at the 1/3 point, each of the three sections will produce 3x the original frequency , or an interval of one octave + a major fifth above the fundamental, etc.
This property of a stretched string was first identified by the Greeks and used by Pythagoras to work out the mathematical relationship between all tones and semi-tones. The octave was found to be a 2:1 ratio and what we today call a fifth to be a 3:2 ratio. Pythagoras concluded that all the notes could be produced by these two ratios as (3/2)*(3/2)*(1/2) gave 9/8 which is a second and so on. The problem was that after applying these ratios repeatedly he was able to move through the whole scale and end up back where he started... except that it missed by a bit, called the Pythagorean comma.
After twelve movements by a fifth (and adjusting down an octave as required) he got back to the same note but it had a frequency of 3^12 / 2^19 which is 1.36% higher in frequency than it should be. So although Pythagoras did a wonderful job he did get it slightly wrong." - Source: http://mathsforeurope.digibel.be/prepvis1d.htm
If we consider an octave as the distance between the last support and resistance (a price tunnel), and the same properties of a stretched string, and the seven main tones of an octave, like table below, we can really play the music of the market!
So, at any moment, we have a price between the support and resistance that is equivalent to an octave. If we have a breakout, this is the same of change to a new octave. Simple as that!
In this sense, at any moment, we just have to use the frequency ratios of each tone, and compare with the relative price of our support/resistance tunnel.
If we convert a backtesting, using this logic, to real tones, we will listen to a music! We can also create a more precise music, using instead of just tones, also semi-tones (12 frequency ratios instead of 7).
Now that we have the composition, i.e., our music, we must create the strategy to buy/sell the symbol when we are playing some tone, like buy at E (Mi) and sell at G (Sol), or create stoploss/takeprofits in the same sense, like stoploss at B (Si).
Actually, we are using the same ratios of music tones as the main strategy point of our trading systems.
To be honest, I never had time to test this (crazy) idea, but would be nice some day listen to this market music (since this logic is deterministic), for instance, the "EUR/USD H1 2013 Symphony" or "GBP/JPY M1 September Rock", so if you are curious and have time to code it, let we know and listen too! ;-)
Thank you for sharing, I would like to publish it here, can you summarize the trading system idea to us?
Let's assume there's a EURUSD sensitive person in the world. In this case, there's also a Non-Aristotelian alien who can take advantage of that.
Alien: Could you please tell me your weight in pounds or kilos?
Bob: 84 Kg.
Alien: Thank you, I'm buying EURUSD.
The alien doesn't care about the correlation between EURUSD and Bob's weight because it can think in Non-Aristotelian terms. It doesn't care if A implies B, B implies A, or Not B implies Not A.
"It is pretty well established that the human mind can think only in Aristotelian categories. Mechanical brains, however, will work differently and will eventually be able to "think" in non-Aristotelian forms of reasoning". Gotthard Günther
Ok, the idea is crazy and simple, it's a new perspective, as it was clearly indicated.
Let's assume there's a EURUSD sensitive person in the world. In this case, there's also a Non-Aristotelian alien who can take advantage of that.
Alien: Could you please tell me your weight in pounds or kilos?
Bob: 84 Kg.
Alien: Thank you, I'm buying EURUSD.
The alien doesn't care about the correlation between EURUSD and Bob's weight because it can think in Non-Aristotelian terms. It doesn't care if A implies B, B implies A, or Not B implies Not A.
"It is pretty well established that the human mind can think only in Aristotelian categories. Mechanical brains, however, will work differently and will eventually be able to "think" in non-Aristotelian forms of reasoning". Gotthard Günther
So I don't see any logic know the weight of one or few people, even for Aliens ;-)
OK, now I see what you are mean, I thought it was a new idea, but as I told you you must always think in a group of people, not just one.
So I don't see any logic know the weight of one or few people, even for Aliens ;-)
Well, that was a quick forced way to close the difficult Idea 1: Using historical weight measure to learn emotional factor about people gain/lose weight to use on the market.
I still do not understand why one single person would not be the same as a group of people.
Anyway, I think this idea is fairly speculative, more for fun than anything else, interesting in any case. Thank you.Well, that was a quick forced way to close the difficult Idea 1: Using historical weight measure to learn emotional factor about people gain/lose weight to use on the market.
I still do not understand why one single person would not be the same as a group of people.
Anyway, I think this idea is fairly speculative, more for fun than anything else, interesting in any case. Thank you.Well, I think you misunderstood the idea.
Anyway, I agree that my idea of proposing and discussing such ideas and a topic like this, and the Chess one, are useless for the Forum and is better recognize this and stop here, since it's not direct to the point.
Thank you.