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one thing to remember, is that the fourier theory, sampling theorem
etc. are not valid on stock price data. Most of those theorems make
fairly strong assumptions regarding the underlying function and metric.
So the real trick is to pick the "essense" of the theorems and not get
hung up on what they tell you exactly.
--- rudolf stricker <lists@xxxxxxxxxxx> wrote:
>
> List,
>
> I would like to get comments on some ideas on the subject above:
>
> From Fourier's theorem we know, that at least 4 points are needed to
> identify a "wave form" in a series of data vs time (like price data).
> Because this is valid independently from the kind of problem or the
> analysis method used, its also valid for "trading" and for any "TA
> technique". So based on eg day-to-day data, we can identify / predict
> only waveforms of at least (3 to) 4 days (to make some profit from
> them).
>
> If we look at the price data of our favorite security from this point
> of view, we can construct probability distributions for price changes
> for eg 1, 2, 4, 8 days (when working with day-to-day data) and
> compare
> eg the probability to loose / win more than xx% for these time
> intervals. To make it more simple, we can also calculate the standard
> deviation for these price changes (, assuming normal probability
> distributions).
>
> If we read from these data, that e.g. the price changes for 1 and/or
> 2
> days are much higher than for 4 days, my thesis is, that we cannot be
> consistently successful with applying TA techniques to trade these
> securities. Or otherwise: The size of 1 and 2 day price changes
> divided by the 4 day price changes is a measure for the "general
> risk"
> or "non-tradeability" of this security. - Improvement of the
> "tradeability" can be achieved (only ?) by an increase of the
> information frequency from this point of view.
>
> So my questions are:
>
> What do you think about these ideas? Is there anything fundamentally
> wrong with it?
> Are there around any approaches of similar or other kind to measure
> the "tradeability" of a security?
> How does your favorite security look like in this light, eg in terms
> of "standard deviations"? What "general risk" rates do you trade
> successfully using TA techniques?
>
> Any comments and suggestions are welcome.
> mfg rudolf stricker
> | Disclaimer: The views of this user are strictly his own.
=====
---
Allan Havemose, Ph.D.
havemose@xxxxxxxxxx
havemose@xxxxxxxxx
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