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R Squared (R^2) is simply a measure of the error between data and a linear
approximation of data. Therefore, when prices appear to be trending
smoothly, you'll get high values of R^2 (> 0.7), indicating that a line is
a good approximation to the data (prices). When prices aren't trending
smoothly you'll get low values of R^2 (< .3).
But R^2 should never exceed 1 nor fall below 0. I'd have to look at the
code you're using to explain how it could be arriving at such values...
By the way, there is an interesting multi-colored plot of R^2 built in to
TS2k...
All the best,
The Omega Man
----- Original Message -----
From: cb <cpbow@xxxxxxxxxxxxx>
To: The Omega Man <editorial@xxxxxxxxxxxxx>
Cc: Mark Brown <markbrown@xxxxxxxxxxxxx>; Omega List <omega-list@xxxxxxxxxx>
Sent: Sunday, June 20, 1999 7:30 PM
Subject: Re: Easy Language Math Precision Wrong?
> The Omega Man wrote:
> >
> > I've said it before and I'll say it again: This debate over precision
is
> > ridiculous.
> >
> > It is ridiculous for two reasons: first, because the input data is not
> > precise; and second, because extra precision in calculations is not
needed
> > for trading.
> >
> > First, the input data is imprecise. Prices are set by a bunch of
screaming
> > banshees in a "pit". Do we need to go out to the nth decimal place to
> > decide what the price is? Or is a good approximation (which is all that
the
> > price spotters can give us anyway) good enough? I say that it makes no
> > sense to run calculations out to the nth decimal place when the input
data
> > is +/- 0.1 points.
> >
> > Second, extra precision is not needed for trading. What's needed for
> > trading is not more precision, but less. We need "fuzzy" approaches,
not
> > precise ones. Carrying calculations out to the nth decimal place in a
fuzzy
> > environment is ridiculous.
> >
> > The Omega Man
> >
>
> Certainly we don't need a moving average calculated to five decimal
> places. Where it might be a problem, is in some statistical calcs like
> standard deviation, or the linear regression function? Some of these
> formulas take the differences of squared values and then take the sq.
> rt. Back in 1982 or so, i remember my stats book giving several
> equations for certain calculations, one that showed the "theory" of the
> calculation and one or more alternatives that were "easier" to calculate
> or less subject to round-off error. I don't know if TS's single
> precision would cause trouble or not, since I don't remember exactly
> what sp. means. If the errors are small I view it as not a problem (at
> least in my very inexact trading). However, if errors are 10, 20 or 50%
> then it might matter. For example I wrote an indicator that defines the
> trend by plotting the lin. regression slope and std deviation in same.
> Maybe no better than a moving average of the same length, but this one
> has a neutral zone which is interesting. Anyway, if the slope was 20%
> too large and the std dev 20% too small, the net result would be an
> error of 40% , and too many uptrends would be indicated. Having said
> all of that, I don't know if single precision is really a problem here.
>
> One observation I have made which may be math related. I plot Rsquared,
> an indicator which has been posted here. (An interesting alternative to
> ADX.) On ED only, it behaves unusually: values sometimes go above 1.00
> (which I believe they never should do); other times the Rsquared value
> stays low even tho the mkt has some trend. Perhaps the code has an
> error. Or, it could be that the true Rsquared doesnt work well on ED
> because of Ed's habit of being flat and then having a big jump. Or it
> could be TS's math. Any ideas?
>
> Conrad Bowers
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