Friday, 18 November 2011

Update #2 on Perfect Moving Average and Oscillator

Below are screenshots of the PMA and PO based upon the improved price projection algorithm discussed in the previous post, shown on an idealised time series of a sinewave (plus trend) in cyan in all screenshots.

The first 3 are plots of the 10 bar PMA in red with a normal 10 bar EMA in green shown for comparative purposes.
As the theory suggests it can be seen that the PMA has the equivalent smoothing of the 10 bar EMA but without any lag.

The next series of screenshots are of the PO, where again the "price" is cyan, the various red lines are 2 bar, 3 bar etc. POs up to an 11 bar PO, and the green PO is a simple average of all these POs.
As I had anticipated these POs lead price by a quarter period which means the cycle highs and lows are indicated by the green "average PO" crossing its centre line, which in turn is a full cycle period length simple moving average of the average PO. My leading oscillator indicator should give timely warnings of these upcoming turns in price. It is also interesting to note that the individual, longer length PO crossings (greater amplitude) also give advance warning of the upcoming turn and the fact that the shorter length POs NOT crossing the centre line and being entirely above or below said centre line seem to indicate the strength of any trend.

Wednesday, 16 November 2011

Update on the Perfect Moving Average and Oscillator

It has been some time since my last post and the reason for this was, in large part, due to my changing over from an Ubuntu to a Kubuntu OS and the resultant teething problems etc. However, all that is over so now I return to the Perfect Moving Average (PMA) and the Perfect Oscillator (PO).

In my previous post I stated that I would show these on real world data, but before doing this there was one thing I wanted to investigate - the accuracy of the price projection algorithm upon which the average and oscillator calculations are based. Below are four sample screenshots of these investigations.

Sideways Market

Up Trending Market

Down Trending Market

The charts show a simulated "ideal" time series (cyan) with two projected price series of 10 points each (red and green) plotted such that the red and green projections are plotted concurrently with the actual series points they are projections, or predictions, of. Both projections/predictions start at the point at which the red "emerges" from the actual series. As can be seen the green projection/prediction is much more accurate than the red, and the green is the improved projection algorithm I have recently been working on.

As a result of this improvement and due to the nature of the internal calculations I expect that the PMA will follow prices much closer and that the PO will lead prices by a quarter cycle compared with my initial price projection algorithm. More on this in the next post.