Statistical Predictor of Price
The purpose of the indicator
Statistical Predictor of Price (SPP) extracts necessary statistics from a large array of lower timeframes data. This allows the indicator to (1) forecast the most probable price values on higher timeframes and (2) calculate the borders of the most probable intervals for them. All that is done in real time.
SPP is suitable both for long-term traders and scalpers.
Operation principles and application
The necessary statistics is found in the array of the lowest timeframes – M1 for М5-Н4, М5 for D1, M30 for W1 and MN. For example, if you calculate a forecast on H4. The indicator processes the array 240 times larger than if the forecast would have been performed using H4 historical data. This increases the forecast accuracy sqrt(240)~15 times in the applied algorithm. Therefore, before launching SPP on a symbol chart, make sure to download the quote history (Tools/History Center) of the symbol. It can be used on all timeframes, except M1. With the increase of the timeframe, the SPP reliability improves. The forecast's mathematical algorithm is the author's KNOW-HOW.
Apart from the location of the most probable forecast points (hexagonal stars), SPP calculates the borders of the most probable forecast interval. Two standard deviations (Number of standard deviations) set the channel borders the price is to fall within with the probability of 95% provided that the indicator has been applied correctly.
SPP forecasts the future based on the already established "statistical fluctuations" of the price. The forecast algorithm cannot take into account the strong effects on the price caused by major events that have not yet occurred, such as important news, etc. Therefore, avoid using SPP for forecasting before important news releases and right after the release (wait for volatility decrease first).
However, if you set three standard deviations (Number of standard deviations = 3) on the boundaries of the most probable interval that it calculates (with option value Length of forecast in bars = 5) on M5 in SPP settings, it is possible to correctly place pending (Buy_Stop and Sell_Stop) orders before the news, which ensures correct news trading.
The indicator has three forecast algorithms applicable to the states of the instrument to forecast in the modes: (1) trend, (2) high volatility and (3) flat. The forecast modes are selected from a drop-down list in Choose market mode.
- Length of forecast in bars (1-60 for M5-M30, 1-20 for H1-MN) - number of bars a forecast is performed for.
- Number of standard deviations (0-10) - number of standard deviations from the most probable value in a forecast channel.
- Choose market mode - select the current state of the instrument to forecast. Values: «Trend», «High volatility» and «Flat».
- Global indicator shift (to estimate the forecast) (1-300) - indicator shift for assessing the quality of its work.
- Dimensions of markers (asterisks) (1-5) - sizes of the markers to display the forecast points.
2. Added the option to change the size of markers (stars).