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John:
I don't use Fib level or support/resistance in my system: I don't believe in
these exotic techniques. I use tipically old stat methods.
If you analize last ten years of 135 minutes returns time series of S&p
(continuous contract) , you can see a good level of autocorrelation between
end of day bar return, and return of bar at time t-2 and t-3.
Starting at 1515 bar, this is ACF():
Lag ACF
1 .0303
2 .1273
3 -.1229
4 -.0410
5 -.0124
Bartlett test at 5% significance is 0.041, so Lag2 and Lag3 values differ
strongly from noise. Return of 1515 bar is partially explained from returns
of 1015 and 1515 (prior day) bars.
My two system use these two returns as inputs of a little neural network
(elementary form: two inputs and one neuron).
-Lorenzo Vercesi
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