Nice one Jose!
I was thinking about trying to do something like that myself, but I’m
sure that what took you 10 minutes would have taken me the best part of a day…Thanks
for saving me the time!!
Now, if you
imagine two additional factors:
1)
An underlying trend represented by a straight upward/downward
sloping line, or even a much longer-period cycle, that represents the “fundamental”
influence on a market.
2)
That the periodicity of all the cycles is not constant but has
some minor variation about their nominal value.
And you can
see how, when lots of “simple” stuff is added together it can
easily look very complicated and random! This is the general gist of what Hurst was on about.
MG, what’s
interesting to me is that if you plot Jose’s indicator and look at the
individual cycles, then zoom out the chart view sufficiently, all the small
cycles start to look rather like white noise.
Maybe I
misunderstand the academics(!) but if its the smoothing process that creates
cycles where none existed before then why can we look at an un-smoothed price
chart and *see* tradeable cycles? Why
do chart patterns occur so frequently? Are these purely random in nature, even
on the week/month time scale? Surely it depends on what time-scale/magnification
level you’re looking at…i.e. what you actually define as a “trade
cycle”? In other words, sure there must be an element of noise at the
very high frequency end of the spectrum (which even itself looks like cyclical
behaviour). But as you go up orders of magnitude that effect must decrease dramatically
and more predicatable influences take over. These would mainly result, I would
think, from the crowd-mentality of speculators…but I don’t want to
get into an Elliot argument here (although I’m sure I can see 3 and
5-wave patterns in Jose’s indicator)!! Then, eventually, the “fundamentals”
start to have a distinct influence. At some point on this scale, as noise gives
way to crowd behaviour and then to fundamentals, you get a point where efforts
at modelling/predicting what’s going on start to bear fruit?
From:
equismetastock@xxxxxxxxxxxxxxx [mailto:equismetastock@xxxxxxxxxxxxxxx] On Behalf Of mgf_za_1999
Sent: Thursday, September 08, 2005
6:53 AM
To: equismetastock@xxxxxxxxxxxxxxx
Subject: [EquisMetaStock Group]
Re: Synthetic cycles
About 100 years ago some guys did a study on autocorrelation - just
read about it, but it was senstational at the
time. It was Slutzky's
"The summation of random causes as the
sources of cyclical processes",
originally published in Russian. Another
guy, Yule, came to similar
conclusions, so this thing is called the
Slutzky-Yule effect and is
the reason why stock price tables in news papers
show the closing and
not the average price for the day. It is
also why many people use
data that has not been seasonally adjusted rather
than otherwise.
The effect is a bit difficult to explain without
using technical
jargon, but let me try. If you smooth a
series you create implicit
autocorrelation - implicit cycles if you
want. When you smooth you
can create apparent systematic effects simply
because you are
smoothing rather than because there is some
underlying factor
responsible for it. This is the senstational
bit! You can use random
noise, smooth it, and generate nice looking,
systematic effects. What
Slutzky did and what shocked the academic world at
the time was to
mimic an actual trade cycle using only random
noise.
Regards
MG Ferreira
TsaTsa EOD Programmer and trading model builder
http://www.ferra4models.com
http://fun.ferra4models.com
--- In equismetastock@xxxxxxxxxxxxxxx, "Jose
Silva" <josesilva22@xxxx>
wrote:
> A nice representation of what a whole bunch
of superimposed cycles
> actually looks like, can also be seen with
this MetaStock indicator:
>
>
> ================
> Synthetic cycles
> ================
> ---8<--------------------
>
> { 5-wave synthetic cycles v1.0 }
>
> { ©Copyright 2005 Jose Silva
> For personal use only.
> http://www.metastocktools.com }
>
> { User inputs }
> plot:=Input("Cycles:
[1]Composite, [2]Individual",1,2,1);
> Sval1:=Input("Sine 1
value",-720,720,2);
> Sval2:=Input("Sine 2
value",-720,720,6);
> Sval3:=Input("Sine 3
value",-720,720,20);
> Sval4:=Input("Sine 4
value",-720,720,50);
> Sval5:=Input("Sine 5
value",-720,720,160);
>
> { Sine components }
> sine1:=Sin(Cum(Sval1));
> sine2:=Sin(Cum(Sval2))*.5;
> sine3:=Sin(Cum(Sval3))*.25;
> sine4:=Sin(Cum(Sval4))*.125;
> sine5:=Sin(Cum(Sval5))*.0625;
>
> { Composite Sine }
> composite:=sine1+sine2+sine3+sine4+sine5;
>
> { Plot in own window }
> If(plot=1,composite,sine1);
> If(plot=1,composite,sine2);
> If(plot=1,composite,sine3);
> If(plot=1,composite,sine4);
> If(plot=1,composite,sine5)
>
> ---8<--------------------
>
>
> jose '-)
> http://www.metastocktools.com
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx,
"teclogeo" <teclogeo@xxxx>
> wrote:
> >
> > A very dirty summary, but with a nice
picture representation of what
> > a whole bunch of superimposed cycles
actually looks like, can be
> > seen at http://www.stockmarketcycles.com/technica.htm
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