A new method to smooth edges of price charts

For the implementation of the method developed software MASANT. As a development tool has been selected an integrated development environment Delphi 6.0 company Borland International. Software product consists of an executable file masant.exe and does not require additional modules. Executable code is a little more than 600 KB, and can be quickly and easily replicated is moved to another computer.

The figure below shows the chart, where the thin line - simple moving average (m = 21), and thickened - a trend highlighted by moving autoregressive adaptive to its type of equation.

The figure shows a new trend oscillator nonlinearity (ONT) - the difference between the new and the traditional sliding moving average. Distribution of interest pilot frequencies decision about the type of nonlinearity in each averaging interval: This diagram is shown in the figure and a timetable INDU.

The figure shows <fast> (m = 8), and "slow> (m = 21) simple moving average and trading signals that are generated through them. Below, the figure shows the new moving average, implementing the proposed method, and the trading signals. The corresponding values of m are the same as illustrated.

As a result, a simple demonstration experiment (averaging time is not optimized, the site chosen arbitrarily schedule INDU) was that the trading signals generated by the two new moving average, in 54% higher than in the trading signals at 1-2 bar. There is a new trading signal (whether due to the effect of increasing the sensitivity and reducing the bias).

Real market governed not deterministic, but not randomly. It is a complex fractal object. Number of fractals, their dimensions and the relationship between them is continuously changing. Inability to date to develop and explore the fractal model of the real market makes it necessary to attempt an indirect account of its characteristics in technical analysis. This is done by foreign traders - Bill Williams (Bill M. Williams) and Cynthia Keyes (Cynthia A. Kase) [3] - and the authors of this article. However, this is not equivalent approaches.

The fact that the price charts - this weekend to complex macro-economic, or the projection of its responses to changes in the market situation, both inside and outside of it. That is why B. Williams looking <fractals> on price charts, though it seems to only traces of their presence in the form of the nonlinear nature of price charts. Many traders, including C. Case, persist in trying to apply the Elliott Wave principle and the Fibonacci ratio in technical analysis. But in these cases is only a set of consequences (reactions of the market), which, as a rule, are not repeated, even with similar market factors.

That is why the Elliott Wave Principle and the Fibonacci ratio <work well> on historical data and mediocre - in addressing forecasting tasks. Why is outstanding traders use these principles? The answer is simple - a great experience and intuition allows them <see> that is not available for the ordinary trader.

Our approach is based on the axiom that the market - a large non-linear stochastic system with a pronounced lag. The result is a non-linear price charts. The proposed method is, of course, can not be one hundred percent probability to evaluate the type of nonlinearity of the market in every moment of time: because of the relatively small value of m, in the presence of price charts of the random component, a finite probability of correct recognition errors by type of nonlinearity criteria used.

Nonlinear oscillator trends ONT, in our opinion, indirectly characterizes the development cycles of fractals. At certain periods of their existence when dominated random laws of fractals, the market is developing in line or very close to linearly. This period <weakness> market and its unpredictability. During such periods, ONT is zero, or the absolute values close to zero. In most cases, the market is developing at a significantly nonlinear laws. MACAHT program further allows to evaluate the type of nonlinearity of the market at a particular point in time. ONT oscillator can be used as a filter trading systems along with information about the type of non-linearity to improve the profitability of trading signals for classification on the basis of market conditions <trend flat> to assess the direction of the market (like ADX) and for other purposes.