From theory to practice - page 535

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Natalja Romancheva:
16:00CAD
Bank of Canada accompanying statement
16:00CAD
Interest rate decision1,50%1,50%1,50%

also wanted to answer first

but

Having analysed yesterday's movement in the pound, I realised that the news focus has been very misleading lately

 
Renat Akhtyamov:

Also wanted to answer at first

but

after analyzing yesterday's movement of the pound i realized that recently the news bias has been very bad

Perhaps we should just avoid trading in such areas? Next to strong news, albeit on a different currency.

Who knows what asset the funds will start to flow into when there are strong disturbances in any instrument.

 
Georgiy Merts:

I'm afraid the "probabilistic solution" here would be the entire set of any trajectories in a given space - and what is the value of that solution ?

That would be like claiming "with high probability" that the Eurodollar will not be negative this year, no more than 100. Notice that the probability of this assertion is close to 100%. But would you get much benefit from such a "prediction" ?

In probability theory, it proves that when the state of an object is influenced by many independent forces, the probability of the state begins to obey Gauss's law. However, the course and value of prices does not obey this distribution for the simple reason that the inputs and outputs of market participants are dependent.

Well, that's another, even broader topic. It's already an analogy with quantum mechanics.Schrödinger's equation tothe rescue.

 
Nikolai Semko:

Well, that's another, even broader topic. It's already an analogy with quantum mechanics.Schrödinger's equationto help.

Again - this equation just gives us the space of possible coordinates. But how does it help us to find the coordinate itself?

 
RRR5:
But this is only suitable for the positive plane. for the experiment I took a 'price channel on an arc', which lies in the positive plane.

What's so difficult about it, RRR5 :

#define   NUMBER_OF_POINTS 10  // Число аппроксимируемых точек.
#define   POLARPOINT_IDX 1     // Индекс "полярной" точки, через которую обязательно должен пройти аппроксимируемый график (или WRONG_VALUE, если такой точки нет)

// Абсциссы точек (можно взять непосредственно datatime каждого тика, бара, значения индикатора.
double dXPoints[NUMBER_OF_POINTS] = { 1,2,3,4,5,6,7,8,9,10 }; 
// Ординаты точек (цены, значения).
double dYPoints[NUMBER_OF_POINTS] = { 1,5,2,2,2,4,6,4,3,3 };  

// Объявляем наш класс, и перегружаем необходимые функции
class CMyApproximator: public CLSMCore
{
protected:
   virtual uint   _N() { return(NUMBER_OF_POINTS); };      // Число точек
   virtual double _X(uint uiIdx) { return(dXPoints[uiIdx]); };  // Значение X точки с индексом uiIdx
   virtual double _Y(uint uiIdx) { return(dYPoints[uiIdx]); };  // Значение Y точки с индексом uiIdx
   virtual int    _PolarIdx()    { return(POLARPOINT_IDX); }            // Индекс точки, через которую должна проходить прямая, при отрицательном значении - такой точки нет.     

public:
   CMyApproximator() {};
   ~CMyApproximator() {};
   
   // Объявляем функцию, которая вернет нам кубическую аппроксимацию
   SLSMPowers SolveCubic() { return(_CountLSM(LSM_CUBIC)); };
};

// ТАМ, ГДЕ НАДО РАССЧИТАТЬ АППРОКСИМАЦИЮ:
// Объявляем объект нашего класса

CMyApproximator maSolver;

// Получаем степени:

SLSMPowers lpPowers = maSolver.SolveCubic(); 

// ТАМ, ГДЕ НАДО ПОЛУЧАТЬ АППРОКСИМИРУЕМЫЕ ЗНАЧЕНИЯ
// Получаем значение любой аппроксимированной точки, например, с абсциссой 3:

double dAnyPoint = CLSMCore::CountLSMPolynom(3,lpPowers); // Получаем аппроксимированную ординату, вызываем данную функцию для всех ординат, и получаем аппроксимированную кривую.
 
Georgiy Merts:

Again - this equation will just give us the space of possible coordinates. But how does that help us find the coordinate itself?

Why would we need to find the coordinate?
For example, if there is currently 65% probability of price moving up and 35% probability of moving down and 10% probability of needing to open a trade, then opening a trade should look like this

if (rand()%10==rand()%10) if (rand()%100<65)  Buy(); else Sell();
And you will be happy.
 
Nikolai Semko:

And why find the coordinate?
For example, if there is currently 65% probability of price moving up and 35% probability of moving down, and 10% probability of needing to open a trade, then opening a trade should look like this

And you will be happy.

And why make something up unnecessarily, you should (in most cases) just stomp up and down the trend (both one and the other, and the third, and if you can learn such a move).

 
Nikolai Semko:

Why find the coordinate?
For example, if there is currently 65% probability of price moving up and 35% probability of moving down and 10% probability of needing to open a trade, then opening a trade should look like this.

And you will be happy.

No-no. That's clear.

The question is WHERE all these percentages come from?

The whole statistical apparatus is based on the known nature of the distribution. In the section"hypothesis testing" you can also estimate if the available sample conforms to our theoretical distribution. So, even at the significance level of a=90%, the price distribution is not a Gaussian distribution (we cannot even speak about a higher significance level). Nor is it any of the well known and studied distributions. The reason I indicated above - the dependence of the actions of the participants on each other (which is unacceptable for most distributions).

As the result - you either have to lower the significance level, and what's the point of counting, if the price movement is described by Gaussian distribution at significance level a=30% ? Error probability will be 70%! Either have to take very wide bounds. And then you get that at the moment the price movement is up 50.001%, and the price movement down 49.999% - and you think on such a spread you will have a profit? In the short term the profit will be random, and in the long term - the spread will eat up all the difference.

 
Nikolai Semko:

Is it possible to predict the trajectory knowing only the trajectory itself in the past?

We don't predict the trajectory in the future, the most important thing is that the last indicator point has hit the centre of the price channel.
Nikolai Semko:
pattern recognition.
Pattern recognition sounds very good.
 
Nikolai Semko:

I think the analogy with gravity is very apt. In the market, gravity is created by money. Some will go in with $100, some with a few billion. The same laws of gravity apply here, and even the same formula I gave above. The force of attraction is inversely proportional to the square of the distance and directly proportional to the masses. Therefore a polynomial regression of degree 2 (parabola) is the most appropriate tool. Although it would be more logical to use a hyperbola, because it is according to the laws of the hyperbola that two gravitational bodies interact. But, the fact is that the parabola is much more convenient for calculations, as well as parabola and hyperbola are very similar to each other at the most important interval.
You can see it clearly here. The red line is the parabola and the blue line is the hyperbola.

The main difference between the gravity of money and the gravity of celestial bodies is that money can suddenly appear and suddenly disappear, creating powerful gravitational fluctuations. But to calculate this event, and there is such a thing as a channel breakdown.

Not only a wonderful comment, but also the most beautiful.)

Let me say a few words. If the market were a closed formed system, perhaps many things would be simpler, but we have not only the phenomena of the appearance and disappearance of some volume of money mass, purposely going in one direction and separating into scattered small accumulations of such mass, but also the possibility of this money mass constantly increasing, (additional controlled periodical emission), i.e. as a result of this constantly expanding volume of capital, a spiral-like forward movement is created. The question is how this factor could be accounted for. Probably the expanding universe option would be the one to compare.))

P.S. Perhaps due to this constant translational motion we cannot see a normal distribution, but only something close to Laplace (double exponential).

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