There is one issue I have involving predicting future is that my software package amibroker does not seem to handle data or graph beyond realtime(current time). Any contradiction or alternative suggestion are appreciated. Thanks
Yes and NNs are of no interest to me, for a variety of reasons... The beauty of simple regression is its intuitiveness. Normally, people are happy to sacrifice some degree of robustness.
Although reversion to the mean is probably one of the most fundamental and stable observations of the stock market behavior NN algorithms are not the solution. Our research in this respect shows us that an algorithm that utilizes reversion to the mean phenomenon with consistent positive expectations is best implemented with interpolators. Of course, as everything that is practical and efficient our approach is surprisingly simple and intuitively acceptable. Below is the summary of principles that we have used to develop our trading algorithms. 1. Most of significant market moves caused by the phenomenon of âSpontaneous Synchronizationâ where the prices move irrationally too far and too fast creating stable âpanic feedbacksâ that ensure that the price volatility sustains. Those moves increase âprice inertiaâ and make position of the price center of gravity fairly stable 2. Price movements involve collectives of traders that behave like large synchronized flocks. In these flocks the average distance between the flock members and the flockâs center of gravity remains fairly stable. 3. Flockâs center of gravity normally moves in a pattern that vividly exhibits inertia properties of a flock. 4. Subconsciously observing the movements of the price center of gravity market participants synchronously anticipate its next position and place their bets with this observation in mind thus forcing the price to move towards the projected position of the flockâs center of gravity. 5. Natural cubic splines calculated on a sequence of consecutive center of gravity positions create a very reliable expectation of the next center of gravity location in terms of price/time space. 6. The distribution of the actual price fluctuations around a spline predicted point is always Gaussian with the standard deviation that is typically smaller than a price deviation over one time interval used to calculate the center of gravity itself. 7. Price reversion to the spline predicted position of the center of gravity normally has greater price differential compared to the deviation of the center of gravity itself thus ensuring stable positive expectations for the mean reversion trading algorithm.
Of course, I am using it to determining the trend, nothing will predict the exact value, no questioning of that. But LR cannot even predict the trend significantly over 50%. The best I have so far, after pretty much frying up my machine, was a 2 week (10 trading days) trend prediction of the S&P 500 index with 59% accuracy tested from 11/3/09 back to 2/4/09, using over 20 predictors and multiple lags from each predictor (yes, the matrix has hundreds of columns). I have another 3 day trend prection on S&P 500 using the same predictors plus S&P 500 's own past 3 day closing price (because for 3 days, there is autocorrelation effect), that has 62% accruacy, back tested for the same period. What I found so far is that if I drop the predictor/lags that individually have lower correlation to the S&P 500 index compared to other predictors, I actually lower the accuracy of the trend prediction, contrary to common sense. But if I add more and more even remotely related time series, accuracy creeps up. Hence do we just need a supercomputer with every single piece of data imaginable? With slightly better than 50%, one has to not pay commission and use binary options or some sort to even have a trading system.
I used to believe that, I am still skeptical. That said I have seen a software program which is about 70% accurate on direction using fourier analysis and time series forecasting.
I am an educator by nature. If I have time (and feel healthy enough) I do not mind to share the bits and pieces. I am a big believer in education and overall good of probabilities understanding. However, I am not in a position to be a part of any war of âdicksâ that is why I rarely post..