Once upon a time, long long ago ...
In
(1)
Here: **T**is some kind of period (like**T**= 5 days)**P**_{0}is some Moving Average (example: a 30 day Volume-weighted Moving Average:**VMA**)**P**(n) is today's stock price and**P**(n-1) is the price yesterday**P**(n+1) is the*next*stock price in the sequence ... namely*tomorrow's*price.
P_{0} is constant at
$20 and we start with
P(1) = $25, P(2) = $26 then use Equation (1) to calculate P(3), P(4), etc. for
various values of T. We get:
Notice that the price sequence defined by (1) oscillates about >Were you trying to predict tomorrow's price, based upon the last two prices?
>So you decided it was easier to toss a coin, eh?
> >Wake me when you're finished ...
T and the number of values to use in the P_{0}
moving average and ...
>Huh? The number of values in the >I haven't the faintest idea what you just said! A moving average of moving averages?
>P(n) is >It makes
So far we've been predicting tomorrow's value ... that's our P(n+1) ...
then, tomorrow, at the end of the day, we do it again using tomorrow's actual closing value in order to predict the value
for the next day. In other words, we're always using the actual values for P(n) and P(n-1),
not our predicted values, P(n) and P(n-1).
In other words, we keep correcting our prediction, replacing it with the actual value in order to do the next
prediction. In other words ...
Hold on. The UP/DN agreement refers to the whole time range on the chart. That just means we correctly predicted whether the P(n), the 4-day average of stock prices, would go UP or DOWN. Three of the four stock prices in that 4-day average are actual prices, not our predictions, so we'd expect
to get a good UP/DOWN agreement. If we used all four of the actual prices we'd have a 100% UP/DOWN agreement, right?
That brings us to that "Extrapolation", for the last five days. Here we stopped looking at the >But, if the black dots in the center of the white circles mean what I think they mean ...
>I assume you used those numbers, 4-day average, 9-day average, T = 5 ... just to get a good result?
>So, what are your conclusions?
>This is some kind of market timing strategy?
>Well, I'd still like to play with the spreadsheet.
Let's rewrite Equation (1) like so: (2a)
Substituting (2b) into Equation (2a) gives our predicted price as:
Of course, if we're doing
In general then, our predicted price, If the
(3)
That'd make >zzzZZZZ Good idea. |