Discussing the article: "Analyzing binary code of prices on the exchange (Part I): A new look at technical analysis"

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Check out the new article: Analyzing binary code of prices on the exchange (Part I): A new look at technical analysis.

This article presents an innovative approach to technical analysis based on converting price movements into binary code. The author demonstrates how various aspects of market behavior — from simple price movements to complex patterns — can be encoded in a sequence of zeros and ones.

This is what basic analysis looks like in Python:

def analyze_words_frequency(self, prices):
    price_diff = np.diff(prices)
    bullish_mnemonics = []
    bearish_mnemonics = []
    
    for i in range(len(price_diff)):
        window = prices[max(0, i-4):i+1]
        if len(window) < 5:
            continue
        mnemonic = self.encode_price_movement(window)
        if price_diff[i] > 0:
            bullish_mnemonics.extend(mnemonic.split())
        else:
            bearish_mnemonics.extend(mnemonic.split())

And now the most interesting thing is how it works in real trading. Imagine: you look at the chart, and instead of ordinary candles, you see the sequence "1011101". Does it look like nonsense? But it does not! This sequence can tell you more than a dozen technical indicators.

It is funny, but when I showed this code to my fellow traders, they first twirled their finger at my temple. "Why complicate it?" they said. And then one of them noticed an interesting thing: some binary sequences appear before strong movements more often than they should according to probability theory.

Of course, this does not mean that we have invented a machine for printing money. But you must admit  that there is something fascinating about the idea that the market communicates with us through binary code. Like in that “The Matrix" movie, remember?


Author: Yevgeniy Koshtenko

 
Seems like binarisation and quantisation of features, in the MO thread on the forum, didn't end up in anything :)
 

reading from your article, theoretically, it seems promising. I am following up on your next update until this indicator project can be materialized and put to good use. Till then, keep up a good job. 

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