Chop vs. Trend

Discussion in 'Automated Trading' started by Yag, May 1, 2005.

  1. ssrrkk


    I'm new to algorithmic trading and am testing out several ideas at the moment using my homebrew c++ client to IB's api. I haven't tried any of these signal processing / time series analysis methods yet but will get to them soon.

    I always hear about this "past is no indication of future", but I do think there has to be some correlation between the immediate past and the immediate future of the stock which fades away the further you get from your training period. Otherwise, why is it that our eyes can recognize certain features of an intraday timeseries of a stock that persists for more than a day? I think the autocorrelation time itself also varies as a function of time, and there might be certain recognizable indicators that are correlated to the appearance of an especially strong or longer autocorrelation time during which you might have a greater success rate in applying predictive algorithms...
    #51     Jun 12, 2005
  2. slacker


    Yep, I hear ya... From my notebook of thoughtful quotes found on the web that I agree with:

    Recently described in a book titled "Mean Markets and Lizard Brains" by Burnham; he describes the natural desire to find patterns where no pattern exists.

    Building a 'superstition' around signal analysis and cycles can be fun.

    Check out the white papers on:

    Then check the performance of those cycle systems on:
    (Why do these systems not do better, if they can identify trend and choppy periods accurately?)

    The best (IMHO) Tradestation software that works (and available to the public) with cycles is done by Clyde Lee at

    I like most of his stuff and have purchased one of his indicators. Quality work all around.

    I have a C/C++ system also working with IB data and once had it working with the MESA and Fourier routines downloaded at

    If you can program the system will go together quickly. You will find you can define cycles in the past, but trading the next bar remains difficult.

    "Every trader is Dr. Professor of the last bar;
    and Mr. Humble at the next bar."

    Good luck!

    #52     Jun 13, 2005
    Oysteryx likes this.
  3. You're a cute pink baby.
    Go ahead with your "pretty basic idea(s)". Please, send us a postcard when you start making some money!
    #53     Jun 13, 2005
  4. There is short-term auto-correlation for stocks. But it fades after 15 minutes.
    #54     Jun 13, 2005
  5. Well, if you were to read my post again, you would see that:
    (i) I don't; and
    (ii) I don't.

    Happy reading. :D
    #55     Jun 13, 2005
  6. Usually the problem is that you don't know what kind of market it is, until it is already over. If you knew when to "switch" strategies, you would be rich!

    #56     Jun 13, 2005
  7. :D
    I think it was a case of NN seeing something in your post that wasn't really there?! :confused:

    Hmm... "Me thinks tis a weasel..." :D :D :D
    #57     Jun 13, 2005
  8. gnome


    Bottom line... you have to presume/guess whether the market is "trend" or "range" and trade accordingly.
    #58     Jun 13, 2005
  9. Well, if I had to guess, I would think that there may be a small minority of people out there who can identify a trend while it is still exploitable with better than random odds. I do not know how, and I do not count myself among them, but there are enough people in the world that the possibility exists. However, I would be willing to bet any amount of money that they could not do it with the kind of mathematical certainty or even "confidence" that some people here may believe or suggest. The study of human behavior, either individual or en masse, is not as tidy or elegant as the study of pure (hard) sciences such as mathematics, physics and the like.

    As for trading markets that are either trending or range-bound, I try not to rely on the distinction. In my feeble attempt to circumvent the need for a distinction, I scale out of trades. Sometimes it plays out well, and sometimes I get the worst of all possible worlds. But for now, it is the best I can do.
    #59     Jun 13, 2005
  10. gnome


    In other words.... "guess".
    #60     Jun 13, 2005