Digital Signal processing in trading ? My background is in digital signal processing, I just wonder if digital signal processing methods have been used in trading. If so, which methods have been tried and which have been proved to be useful ? Thanks.
Best current source IMO is John Ehlers. He has a website and a couple of books. Go down that rathole and post your findings if you ever see the light of day again.
I messed with it years ago. First thing that jumps out at you when you do an FFT on a closing price series is there's periodicity at certain intervals. Of course this isn't useful since everyone already knows there's periodicity on weekly, monthly and yearly invervals. Don't bother with DSP. Applying statistical analysis is much more useful.
LOL I actually spent about six months trying to figure-out what he was talking about ... it's pretty amazing what folks can come up with!
I purchased the MESA software and programmed my own with DSP source code from http://www.nr.com/. My interest was to filter time series data for input into NN and GA engines. Knock yourself out. Bottom line (IMHO) there is nothing in phase, amp or frequency that will tell you anything about the next bar. (I am sure the next ET poster will respond with a 'I turned $1k into $100k with DSP/cycles'). Great screen shots however!!! What was most helpful in this period was the work by J.M.Hurst which was done before computers.
JJ, don't spoil the fun. There's a great good game in this. Not that we haven't played it here before. Here's how I propose to play this time. We ask Mr. Smith to name a DSP approach that he thinks might be fruitful (as opposed to full of fruit). We then tell him which existence condition(s) of his proposed approach Bitch Market violates. I go first!
Mr. Smith, I have enough background in DSP to speak semi-intelligibly with you. And I have been down some of the paths you may be contemplating. I will tell you EVERYTHING I know about ANY of them I have tried if you will suggest them one at a time. My willingness to tell you everything I know is your first clue to the final answer, especially given the attitude I expressed here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=154220
LOL, now was that necessary Joe? Hey look jacksmith. If what you are asking is does anyone use that stuff to make money? Until otherwise noted, the answer is "Hell No!"
JJ, the WHY NOT is instructive IMO. It teaches you think about the true nature of the markets, and forcefully disabuses you of belief in the "mechanistic fallacy." (The bitch reality being the operative process.)