Discussion of article "Developing a self-adapting algorithm (Part I): Finding a basic pattern" - page 4
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The price is not on a full retracement. There is an interesting peculiarity there. If it is a stock, the pullback is always less than the movement (upward movement, downward pullback) and there are fundamental reasons for this, I have identified them. But I have not built a working model on forex yet. It seems to me that in forex the pullback is always bigger than the movement. And the movement can be in any direction and the pullback will be bigger. Forex is like an expanding sine wave with increasing period and amplitude.
Forex (countries) and stocks (firms) have different nature. They have different laws of development.
forex (countries) and stocks (firms) have different natures. They have different laws of development.
Of course they are. Or are they? Different, but not entirely. In order to create a fully self-adaptive algorithm (my goal), you need to understand how the behaviour of stocks differs from forex.
I have developed several reasons for the difference:
1 - issuance and therefore inflation on currency and no issuance and inflation on stocks.
2 - dividend payments on stocks differentiates them at first glance from currencies.
3 - significantly different total value of currency and shares
4 - shares are denominated in a currency, currency is denominated in another currency, hence it is easy to calculate the value of the share and the absolute value of the currency is not clear.
5 - the attractiveness of a share can rise and fall, currency is used as a means of settlement, so its attractiveness varies less.
6 - raw materials differ from stocks and currencies in that their quantity fluctuates, raw materials become more when demand falls and less when demand rises, plus the cost of extracting raw materials should generally decrease over time due to improvements in technology.
Cryptocurrencies in this context occupy an intermediate position between stocks and currencies. On the one hand, there is an issue, but it is not large, they are used as means of settlement and their investment attractiveness can fluctuate within wide limits.
But all these data can and should be taken into account when compiling an adequate model.
of course it's different. Or is it? Different, but not entirely. In order to create a fully self-adaptive algorithm (my goal), you need to understand how the behaviour of stocks differs from forex.
I have developed several reasons for the difference:
1 - issuance and therefore inflation on currency and no issuance and inflation on stocks.
2 - payment of dividends on shares distinguishes them at first sight from currencies.
3 - significantly different total value of currency and shares
4 - shares are denominated in a currency, currency is denominated in another currency, hence it is easy to calculate the value of the share and the absolute value of the currency is not clear.
5 - the attractiveness of a share can rise and fall, currency is used as a means of settlement, so its attractiveness varies less.
6 - raw materials differ from stocks and currencies in that their quantity fluctuates, there are more raw materials when demand falls and less when demand rises, plus the cost of extracting raw materials should generally decrease over time due to improvements in technology.
Cryptocurrencies in this context occupy an intermediate position between stocks and currencies. On the one hand, there is an issue, but it is not large, they are used as means of settlement and their investment attractiveness can fluctuate widely.
But all these data can and should be taken into account when compiling an adequate model.
I disagree with such simplicity.
Issuance of currency by the Central Bank of the country and additional issue of shares and placement on IPOs are of similar nature.
Inflation is a very complex parameter. It is the overissue of money in relation to the produced product, and crisis phenomena in the economy, which have fundamentally different nature, and there are probably many unexplored and not understood moments in the nature of inflation.
Stocks and currencies should be compared by comparing the state with the firm. Stability of state development is provided by reasonableness of laws and support of their execution, and creation of favourable conditions (market conditions, I am a marketman) for development of firms. A firm develops on the basis of market competition and the urge to entrepreneurship (if roughly according to Schumpeter).
The volumes are of course different, the state economy is formed by economic units - firms.
Dividend payments on shares are an indirect evaluation of the firm's performance, while in the state it is GDP and the level of social security (which ensures stability) and then commodity turnover and exchange rates.
In the value of shares I am in favour of Buffett's definition of the true price, calculated through the 10-year profit.
And of course volatility is different, the probability of bankruptcy of a country is less than that of a firm.
Raw materials, a separate topic, each group of raw materials has its own life. Product, resource, precious metals have different factors influencing the price.
Crypto will live forever as long as there is crime).
The author has taken a swing at a hitherto unsolved problem: to create an adaptive model based on the analysis of fundamental factors.
This is a thankless task. Adaptation even taking into account only technical factors (TA) has not been solved, and even less so the "fundamentals".
But this is a suitable topic for polemics - we can discuss it for a long time.
The author took a swing at a hitherto unsolved problem: to create an adaptive model based on the analysis of fundamental factors.
This is a thankless task. Adaptation even taking into account only technical factors (TA) has not been solved, and even less so the "fundamentals".
But it is a suitable topic for polemics - we can discuss it for a long time.
Yes, exactly, the problem has not been solved by anyone yet, but I will show the results in the next articles. This is not just a polemic, there is a significant progress and result. By progress I mean not only a viable algorithm, but also a very capacious theoretical base. Is it possible, yes it is possible. Can it be done by one person? No, you need too many competences. But tasks can always be delegated.
This is really a great article. Looking forward to the new article.
Thank you, new articles have already been written and are in the process of being translated. They will be even more interesting.
Thank you, new articles have already been written and are in the process of being translated. They will be even more interesting.
Interesting concept and article, thank you!
I am working on a similar project, the main difference is that in the N-sized window (N is between 1-5 at first) I use the relation of HLOC values of consecutive candles and also the relation within all the bars in the window one by one. It seems this will make it too complex.
This concept is nice with its simpleness.