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I have just recently been doing some reading about this in John Ehler's -
Rocket Science for Traders . He does make an attempt at "predicting" future
price movement. Below is a brief example of his approach to this. I haven't
found out how to test this in AB , but maybe someone else has.
http://www.mesasoftware.com/mesa98.htm#MESA96
MESA2002:
MESA2002 is THE premier cycle-based trading program. MESA2002 is available
for a variety of trading platforms, includingTradeStation (4.0, 2000i, and
6.0), SuperCharts, NeuroShellTrader, and Standalone. It accurately measures
short term cycles. The trading platforms offer powerful extensions to
trading systems by making variables adaptive to the measured cycles. One
such adaptive application is to determine whether the mode of the market is
cyclical or trending.
MESA2002 program Charting Screen
The basic operation of MESA2002 is measurement of the spectral content of
the price data using the Maximum Entropy Spectral Analysis method. When the
data is stationary the cycles are stable and consistent. The spectral
display segment is a colorized contour plot showing the quality of the cycle
measurement (the bottom display segment). When the measured cycles are
erratic or when the spectral energy is "splattered" across the range of
cycle periods the market is in a Trend Mode.
The market mode is sensed by examining the phase of the dominant cycle. A
fundamental definition of a cycle is a constant rate change of phase. For
example, a 10 day cycle changes phase at the rate of 36 degrees per day to
complete the 360 degrees in each cycle. The Trend Mode is identified by the
failure to change at a constant rate. The phase presentation in the 3rd
display segment shows the phase changing at a constant rate, forming a
sawtooth waveform in the Cycle Mode, and changing erratically in the two
Trend Mode areas.
The Sinewave Indicator in the 2nd display segment gives the position
reversal signals by the crossing of the two lines. Note these two lines
cross only when the prices are in the Cycle Mode and, unlike most oscillator
signals, do not give false whipsaw signals when the price is in the Trend
Mode. The Sinewave Indicator is anticipating the cyclic turning points, is
generated by adding 45 degrees to the measured phase angle and plotting the
Sine of it.
The strength and direction of the Trend are shown by the two adaptive moving
averages overlaid on the price bars. The slower of these averages is an
Instantaneous Trendline, obtained by completely removing the dominant cycle
component. The faster of these averages is a minimum lag filter.
MESA2002 (standalone and TradeStation versions) makes a prediction of prices
10 bars into the future. This prediction is made on the assumption that the
measured dominant cycle will continue into the future with the same
amplitude and phase. Therefore, the prediction has greater validity when the
prices are in the Cycle Mode.
MESA2002 (standalone) reads five different data types directly, including
Metastock, CSI, ASCII, and TC2000. You can generate your own custom
portfolio and have MESA2002 automatically scan that porfolio for buying and
selling opportunities.
The MESA2002 DEMO is a 534 KB self extracting file. When you run MESADEMO,
it is extracted to the C:\MESADEMO directory as the default. To run the
demo, you click START . . . RUN and then type C:\MESADEMO\DEMO32. Then click
on the MESA2002.DBD file.
...........................MESA2002 (standalone) .........$350
...........................MESA2002 for NeuroShell Trader. .........$350
...........................MESA2002 for TradeStation2000i or 6.0
.........$495
...........................MESA2002 for TradeStation 4.0. .........$495
...........................MESA2002 for SuperCharts. .........$250
. . . . . .
(Back to Start)
----- Original Message -----
From: "gosub283" <gosub283@xxxxxxxxx>Gosub
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Wednesday, March 26, 2003 1:08 PM
Subject: [amibroker] TRENDING vs. RANGING markets
> Hi everyone,
>
> I think this issue will become more important
> over the next year or two.....
>
> When a human looks at a chart, he/she can
> immediately determine if a market is in
> a TRENDING mode or a RANGING mode.
> It is a most amazing feat of human visual
> data analysis that takes place in a matter
> of seconds. Trying to get computers to "visually"
> analize anything takes major computing power.
> Unfotunately computers and trading system have
> a much more difficult time of determining these
> market modes than us humans.
> Things become very "fuzzy" when trying to
> put the question of "Ranging vs. Trending" into
> mathamatical algorithms. And...of course.. the
> trading timeframe (long term vs. short term),
> make things even fuzzier. (is "fuzzier" a word ??)
>
> For those of us who program automated systems,
> this is especialy important because it means
> that we can design systems that adjust effortlessly
> between ranging and trending markets. If correctly
> identified, a system can use a particular set
> of indicators for Ranging markets and then switch
> to other indicators when a trend is determined.
> Allowing for a truly autonomous system.
>
> Has anyone found a way to mathamatically (reliably!)
> determine if a market is Trending or Ranging ???
> (An AFL algorithm perhaps)
> In other words, an indicator which can give direction
> as to which set of indicators to use.
> (A hypothetical example of such an indicator would
> have a response from 0=ranging to 10=Trending )
>
> Cheers,
> Gosub283
>
>
>
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>
>
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