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Pattern searching using candles may be significant with EOD data but EOD results are very unlikely to apply to Intraday patterns. candles lack important information (like HL precedence). Intraday patterns are arbitrary and are subject to timing, timing shifts, data delays, time frames, etc. An Intraday pattern will not retain its shape when any of these non-price variables change. I have another demo somewhere that explores that...may look it up when i find the time. Intraday patterns should really be run in the smallest timeframe possible.
My preferred approach was to overlay a relative time vs price matrix on the chart. Matrix dimensions can be referenced to the initial open price of the first bar in the matrix, and can be expressed in percent change. If a quote falls in one of the cells it is set (binary). This way you end up with a binary image consisting of many small binary squares (like a checker board). This image can be expressed with a unique string or number. You determine pattern profitability by sliding this matrix over your data and looking for profit. This is very computational intensive...
However.... this can lead to a very unique and interesting trading systems. Such a system would capture the current n-bar pattern. You then take this pattern and slide it over you historical data, calculating the profits of this pattern as you go along. This way you will get a Profitability rating for your CURRENT price pattern. This pattern is totally random and not related to any traditional patterns - however if the system finds that this pattern was historically profitable the system would make the trade. Thus this system will trade heretofore unknown patterns that are defined in real time as data arrives. The advantage is that this system doesn't require a pattern library. There is much more to it... actually very interesting. Because you can collect profitable/unprofitable patterns in a file and gradually build an empirical pattern library, completely automated. Gradually this system would become more efficient (computationally) as the library grows, and winning patterns are traded and losing patterns are rejected.
Instead of sampling raw price you can of course sample indicators, or combinations of indicators, in the same way. Indicators tend to compress price data and reduce the computational overhead. Nevertheless, It can get quite complex. Many years ago I spend a significant amount of time on this however the computing overhead was just too much - perhaps with faster computers this idea can be revived.
best regards,
herman
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Thursday, February 28, 2008, 8:42:28 AM, you wrote:
> Thanks Herman,
> Just when I was going to go to bed too!
> brian_z
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