1st and 2nd derivatives of the MACD - page 28
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Correction: forex quotes behave like 1/f^2 noise (red noise). Here is the EURUSD M1 spectrum, 8192 bars (code attached):
The red line is a perfect 1/f^2 spectrum. The 1/f^2 spectrum is typical of Brownian motion. Interesting to read this link on the subject of this thread:
http://includesoft.com/Statistics/About_the_Randomness_of_%20the-_%20FOREX_Rates.htm
Colleague, it's early days, and you are really pushing it :) I'm still awake, but I've already thought about it, and here's your little curve... and - exactly two ways to understand it: either to read the article in Russian or code in OOP :(
It's interesting...
By the way - for the proponents of the position: "if in an SB process the application of a certain method allows to draw some conclusions that are not peculiar to SB processes, then the application of that method in a process with a non-random component is unacceptable" - I DO NOT BELIEVE (Vinin, sorry if you can).
https://www.mql4.com/go?http://includesoft.com/Statistics/About_the_Randomness_of_ the-_ FOREX_Rates.htm
The article is curious. But still... I still don't believe that you can't systematically make money on the market.
There are phenomena that do not fit in this kaleidoscope of explanations: The author does not consider dependencies between historical quotes (or rather returns) of a single instrument. In a perfect RW (Random Walk) there should not be dependences in principle, because it's not RW anymore. It means that dependencies may be detected by tests but only within the "error" limit, i.e. statistically insignificant. Read more about it here.
Regardless of whether the phenomenon at the link is caused by the known behaviour of volatility reflected in, say, *ARCH models (the point of view of most who discussed the phenomenon), or the deep memory of the market (my point of view), it still exists. And quite reliably establishes that forex is not RW (and very probably not martingale). And also that incoming information is far from being fully assimilated, i.e. the market is inefficient even in a weak sense, i.e. when considering quotations alone.
P.S. Please note that the phenomenon is essentially non-linear: the usual Pearson autocorrelation does not catch it, as it practically disappears already at the 10th bar.
And I don't want to hear anything about stationarity/ non-stationarity of the phenomenon (it is to faa1947): the practical application in trading is out of the question.
Will be interesting - write in person, I will try to explain misunderstandings. I do not want public discussion here.
The article is curious. But still... I still don't believe that you can't systematically make money in the market.
It is possible to earn systematically in the market. Here's an interesting article and excerpt from it:
https://www.mql5.com/go?link=http://news.bbc.co.uk/2/hi/business/7109805.stm
"My model is one of those which prints money," says maths graduate William Hooper from the comfort of his luxury home in Hampstead, one of London's most desirable suburbs. The mathematical model he has designed to trade currencies does not of course literally print money but it has made huge sums for both him and the bank where he works. ...So-called algorithmic traders are usually paid about 20 percent of the money their model makes and the typical algorithmic trader will make his employer about US $10-20 million a year... He says he enjoys spending his money on hi tech gadgets, art and champagne and, as his model does all the trading, he has plenty of time to work out in the gym and to go on adventure holidays.
Note that the quants are mostly mathematicians, not econometricians. So you have the advantage.
https://www.mql5.com/go?link=http://www.bbc.co.uk/news/business-14631547
Here he is our typical millionaire trader:
Correction: forex quotes behave like 1/f^2 noise (red noise). Here is the EURUSD M5 spectrum, 8192 bars (code attached):
The red line is a perfect 1/f^2 spectrum. The 1/f^2 spectrum is typical of Brownian motion. It is interesting to read this link on the subject of this thread:
https://www.mql4.com/go?http://includesoft.com/Statistics/About_the_Randomness_of_ the-_ FOREX_Rates.htm
There are truth, lies and statistics that teach you not to trust either truth or lies.
The basis of statistics is the postulate that every figure obtained must make economic sense otherwise it is very easy to fall into a numerical fornication. The article explores the minutes. There is no economic explanation for movements on minutes, so all the conclusions in the article are nothing more than an exercise in statistics. I would like to remind you that any theory is only consistent if it has propositions that cannot be proved by means of the theory itself (Gödel's theorem of incompleteness and inconsistency).
It has been pointed out many times on this forum that you can start talking about trends on forex with H1. And seriously, start with D1 and above. From these timeframes you can match movements to economic and political events, i.e. understand the significance of the numbers.
In my post I wrote that SB supporters are the majority in the world. And these are people who are not trainable. You can name the Nobels, who after the crash of 87 and accusations against them that they are crooks, set up a fund, ruled in full compliance with SB, went bankrupt in 97 and continue to claim the correctness of the theory of SB.
The reason for this stubbornness is very simple: the main money in the west is in a variety of mutual funds which are "consecrated" by Nobels who have the "advanced" science based on SB and the efficient market. How else to fool depositors after another loss of money in these funds? And we are talking hundreds of trillions of dollars!
Read other authors. For example, Mandenbrot and the like. There are publications by statisticians who provide evidence for inertia in markets.
I described my old sinusoidal fit model because someone asked for its output. I gave up on regression a long time ago, and I'm not agitating my model here. For regression to be successful there must be a deterministic and predictable signal in the quotes that exceeds the noise. Natural phenomena are more or less predictable because of the repeatability of their physical assumptions (a famous example is predicting the number of sunspots). Such a deterministic signal in forex quotes, in my opinion, does not exist. There faa mentioned seasonality and economic cycles. Maybe on larger timeframes (years) they can still be spotted, though less frequently due to the influence of governments on the economy in their attempts to avoid a very fast growing economy with its inflation and the recessions which are the natural course of things. Imagine the task of predicting air temperature if people learned to regulate it with a certain precision in an attempt to avoid cold winters and hot years. If we are talking about quotes on small timeframes, which interests traders (minutes, hours), then there is no seasonality and cyclicity. There are only external perturbations (news) and market reactions. Since the direction of news cannot be predicted in my opinion, it makes no sense to include them in a market model (regression model, for example). The market reaction, i.e. the behaviour of the price after its initial surge up or down, can still be predicted, or at least I hope it can.
I never said anything about "determinism". I had an idea based on the theory of canonical representation of random variables. Anyway, fuck it. That there are no nebulous "trends", much less seasonality, etc. - I don't need to be agitated about that. I write that in almost every post.
PS; briefly, wrote faa: ... A quote is a complex stochastic multifractal, it's not even self-similar, but on a trader's accessible "visual" scale it behaves almost like a martingale, and this despite the fact that the process has strong non-linear relationships. One can get some adequate knowledge about the process only with the help of fractal analysis, many methods and techniques have been already accumulated. For example, a singularity spectrum, which will show the whole abyss of the situation :o)
It is possible to make money systematically in the market. Here is an interesting article and excerpt from it:
https://www.mql5.com/go?link=http://news.bbc.co.uk/2/hi/business/7109805.stm
"My model is one of those which prints money," says maths graduate William Hooper from the comfort of his luxury home in Hampstead, one of London's most desirable suburbs. The mathematical model he has designed to trade currencies does not of course literally print money but it has made huge sums for both him and the bank where he works. ...So-called algorithmic traders are usually paid about 20 percent of the money their model makes and the typical algorithmic trader will make his employer about US $10-20 million a year... He says he enjoys spending his money on hi tech gadgets, art and champagne and, as his model does all the trading, he has plenty of time to work out in the gym and to go on adventure holidays.
Note that the quants are mostly mathematicians, not econometricians. So you have the advantage.
https://www.mql5.com/go?link=http://www.bbc.co.uk/news/business-14631547
Here is our typical millionaire trader:
yes anything is possible, no doubt about it.
Only this and similar articles carry the "primary" obvious speculative meaning also amplified by journalists. And how many funds have gone down the drain, apparently not without the help of quants :o)
Are you sure you have written it correctly?
The basis of statistics is the postulate that every figure obtained must make economic sense otherwise it is very easy to fall into a numerical fornication. The article explores minutes. There is no economic explanation for movements on minutes, so all the conclusions in the article are nothing more than an exercise in statistics.
This, to put it mildly, is also an exercise in verbal equilibrium. No one prevents one from looking at minutes and even ticks and drawing conclusions on them, which contribute to the creation of a profitable strategy. Quants do just that.
In general, arbitrage strategies use "economic sense" and work on small timeframes.