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Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  Re: Technical Analysis Idea Date:  4/22/2013  1:11 AM
Author:  yodaorange Number:  421163 of 539095

Qaz said: Suppose instead of looking at the charts as price vs. time we turned them somehow and made a spiral chart that would fill in the leaves over time. Then we might have a clearer picture of the cycles.

Qaz, your are on a similar path that some of the HFT guys use. To get a bit technical, you can either represent a signal in the "time domain" or the "frequency domain."

When you look at a normal stock chart, you would say it is in the time domain. You can mathematically convert it to the frequency domain. It is particularly useful if you are looking for some kind of period cycle.

To my knowledge, the first book written on this was:

The Profit Magic of Stock Transaction Timing" by J.M. Hurst back in 1970. The cover proudly proclaims: "20,000 hours of computerized data analysis has unlocked. . .

I was able to find my copy and will scan it over in the next few days.

Long story short, a lot of people have spent a lot of time working on detecting consistent cycles in stock prices. Some of this work is done in the time domain and some it in the frequency domain.

Rest assured that a lot of the Math/Physics PHD's that have become financial researchers look in these areas. These folks are looking for any edge that can get. They have the ability to looking at stock prices in the frequency domain in real time. This is the equivalent of your spectrum analyzer for electrical signals. . .

It is vastly large topic with a million different directions to look into. I am sure there are several boards around where folks still debate different aspects of this. I have not kept up to date on the exact approaches being used, and it is not like the top researchers will share their work. They keep the good results close to the vest, trying to generate a little extra return for their hedge funds.

Pretty interesting area you have wondered into . . .

Good luck,

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