Monday / February 17, 2020
Continuation from Post #74 on Building a Trading System with a Baseline as Cornerstone, dated January 12, 2020...
So my personal definition of a baseline starts with cycle theory, (according to Brian Millard, Jim Hurst’s work on cycle theory was based in part on a belief that some 23% of price motion is based on cyclic movements which are additive in nature and can be seen clearly if envelopes are constructed around the price movement.)
It also incorporates Edgar Peters’ fractal market hypothesis, which views financial markets as fractal in the sense that they follow a cyclical and replicable pattern. (Fractals might be defined as "fragmented geometric shapes that can be broken down into parts which replicate the shape of the whole.")
Accordingly, to generate a baseline, I conduct an analysis to quantify the general frequency and magnitude of cyclical waves formed in the wake of price action, and then plot a centered, smoothed moving average as close as possible to the zero amplitude of the corresponding waves/cycles.
As a result, the claim that there is no "best" moving average is not a notion under which I operate—opting instead to use baselines calculated in the above-described manner.
Centered/Smoothed Moving Average Baseline with Envelopes Generated from Wave Frequency/Magnitude
Continuation from Post #74 on Building a Trading System with a Baseline as Cornerstone, dated January 12, 2020...
So my personal definition of a baseline starts with cycle theory, (according to Brian Millard, Jim Hurst’s work on cycle theory was based in part on a belief that some 23% of price motion is based on cyclic movements which are additive in nature and can be seen clearly if envelopes are constructed around the price movement.)
It also incorporates Edgar Peters’ fractal market hypothesis, which views financial markets as fractal in the sense that they follow a cyclical and replicable pattern. (Fractals might be defined as "fragmented geometric shapes that can be broken down into parts which replicate the shape of the whole.")
Accordingly, to generate a baseline, I conduct an analysis to quantify the general frequency and magnitude of cyclical waves formed in the wake of price action, and then plot a centered, smoothed moving average as close as possible to the zero amplitude of the corresponding waves/cycles.
As a result, the claim that there is no "best" moving average is not a notion under which I operate—opting instead to use baselines calculated in the above-described manner.
Centered/Smoothed Moving Average Baseline with Envelopes Generated from Wave Frequency/Magnitude