Econometrics: one step ahead forecast - page 30
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branch summary:
Harry's methodology is based on this. Wyckoff argued that the market has a group of highly capitalized organized operators who "play with one hand", and he called this group the Composite Man or simply the Market. It is this group that buys on the lows because they create those lows. Harry built a quantitative model that maximizes the income of this very group. Atits core, his model is similar to the "bottleneck problem" formulated by R. Bellman, and Harry's equations are likely to resemble those of dinamic programming .
The bottleneck problem in the classical formulation sounds like this. There is a final product A that requires raw material B, which is produced in system C. But to increase the capacity of system C you have to use raw material B. This is the bottleneck. The goal is to maximize the output of A in a given time interval. The optimal strategy would look like this - up to a certain point, work on increasing the stock of raw materials, and at a certain point there is a "breakthrough" - that is, raw materials are sent to the main production. The analogy with the market is not difficult to draw.
Further. Harry's model has an essential duality - existence of two lines of a possible market way - the flat phase (accumulation of stocks on one of the sides) and the trend phase (initiation of a trend in this direction - analog of the main production output). Note that prior to this, the presence of trend and flat was only an observable phenomenon! Once this type of model is built, the division into phases becomes fundamental.
My problem - I can't set the problem correctly. Roughly speaking - what prevents CMs (Composite Mans) from pushing the price sky high after accumulation. What prevents costs from rising as the price moves, because to move the price up, you have to buy, i.e. increase the average price of your long stock and somewhere there is that optimum price above which profits start to fall.
In Harry's terminology - the base line is the level of accumulation of reserves, the projection line is the appropriate price to which CMs accelerate the trend. What matters is the duality, i.e. it is not known exactly, when the breakthrough (bifurcation point) will take place, but it is known that if the breakthrough takes place at point A, the price will move up to point B.
My view is that the essence of the model is not the division into insiders/cooks and suckers. That division is conditional. The essence of the model is that the potential for movement is determined by the losses of previous entrants. Harry seems to consider the flat phase as a period of accumulation of open positions, accumulation of some potential, and the trend as its realization. But there may be other realizations - they should reflect behavioral patterns: accumulation of positions, fixation of losses and profits.
I totally agree! It is not the price that should be predicted, but the rhythm dynamics of the market. Moreover, it is during the flat period that the future movement is formed.
I totally agree! It is not the price that should be predicted, but the rhythm dynamics of the market. Moreover, it is during the flat period that the future movement is formed.
DC2008:
Avals:
I totally agree! We should not predict the price, but the rhythmodynamics of the market. Moreover, it is during the flat period that the future movement is formed.No matter how you look at it, we are trying to make a forecast based on historical data. But what Avals proposes is interesting from the other side.
I use the market model: cotier = trend + seasonality + cyclicality + noise + outliers
The model I use includes: trend + noise. There is no seasonality in forex, I am not able to model cyclicality and I am not interested in outliers.
It would be interesting to add to this model the information that Avals is talking about. A wisetwist, so to speak. If this information is not correlated with the price, it is very good and in theory we will obtain a better forecast. If correlated, we will see it in the model and we can forget about the rhythm dynamics.
If any of you give me your rhythmodynamics diaries, then I will build a model using it and we will be able to evaluate it. Right now I have diaries from August 1 to the current date.
Same eggs on the side. :))
Same eggs on the side. :))
(I mean the same ones.))
I've been trying to work with volumes and it's a load of crap. What kind of prognosis is it, when the volumes don't reflect anything good? It just shows that people are still pissed off)))
I mean the same ones )))
I've tried it with volumes and it turns out to be a load of crap. What kind of forecast is it, when the volumes don't reflect anything good? It just shows that people are still pissed off)))
Volume is an amount in dollars or euros, and here is a surrogate for volume. Real volume is a very valuable thing.
I would like to draw your attention to the fact that the use of DX (see above) has improved the forecast. I think this was because the independent variable EURUSD now depends not only on its lag values but also on the lag values of the other currency pairs included in the dollar index. And in the case of Avals we would have added qualitatively different data.
on the euRe index down tomorrow.
index 16.11.
There is an indicator for prediction: hodrick_prescott_indicator. This is how it draws (I have specially marked it with arrows to compare it later, EURUSD, 4H):
on the euRe index down tomorrow.
index 16.11.