The magical 3rd derivative of price...

Even though I probably shouldn't give anyone here any hints... People who work on their indicators and know their math and statistics can figure all of this out.

Here is what a 1st,2nd,3rd, etc derivative of price is...

1st Derivative Indicator = Indicator Based Upon Price
2nd Derivative Indicator = Indicator Based Upon 1st Derivative Indicator
3rd Derivative Indicator = Indicator Based Upon 2st Derivative Indicator
4rd Derivative Indicator = Indicator Based Upon 3rd Derivative Indicator

Here is the part that confuses the hell out of people. It's actually the further you go the more leading the indicator if you know how to extrapolate curves backward. :cool: However, the accuracy loss increases exponentially on each iteration. 2nd/3rd derivative is good as it gets with varied levels of noise stripping.

Divergences between 2nd derivatives indicators and price give a great tell on the market. But, 3rd derivatives are magical for reading the market.

:D :D :D
 
Quote from RangeTrader:

Even though I probably shouldn't give anyone here any hints... People who work on their indicators and know their math and statistics can figure all of this out.

Here is what a 1st,2nd,3rd, etc derivative of price is...

1st Derivative Indicator = Indicator Based Upon Price
2nd Derivative Indicator = Indicator Based Upon 1st Derivative Indicator
3rd Derivative Indicator = Indicator Based Upon 2st Derivative Indicator
4rd Derivative Indicator = Indicator Based Upon 3rd Derivative Indicator

Here is the part that confuses the hell out of people. It's actually the further you go the more leading the indicator if you know how to extrapolate curves backward. :cool: However, the accuracy loss increases exponentially on each iteration. 2nd/3rd derivative is good as it gets with varied levels of noise stripping.
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Thanks for the explanation.So then the derivatives are only useful for confirmation only and not appropriate for prediction.
 
Quote from ocean5:

Thanks for the explanation.So then the derivatives are only useful for confirmation only and not appropriate for prediction.
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Er... Did you look at the charts?

3rd and 4th derivatives can be configured to be leading indicators with minimal bad signals.

See below... 4th derivative leading!
 

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Quote from RangeTrader:

Er... Did you look at the charts?

3rd and 4th derivatives can be configured to be leading indicators with minimal bad signals.

See below... 4th derivative leading!
More...

Indicator based upon price is more leading then 4th derivative.can`t you see it yourself?It is obvious from your own chart sample.
 
By upping the number of noise stripping passes I can push a 4th derivative until it is non leading and merely a confirmation indicator.

Curious where I learned about some of this stuff originally? If you look around in some advanced statistical analysis of data books you can find some good stuff...

But I was reading this article by a quant fund manager and he happened to mention one of their main mathmatical tricks in a indirect way... Was quite easy to solve it from there.


Look below... This is the exact same 4th derivative red/green indicator line. I have not offset it forward/backward. I simply applied double the filtering passes causing it to lag until it matches price.
 

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Quote from ocean5:

Indicator based upon price is more leading then 4th derivative.can`t you see it yourself?It is obvious from your own chart sample.
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Sorry,i was confusin the upper and lower panes.The one below is looking more leadin - true.
 
Quote from ocean5:

Indicator based upon price is more leading then 4th derivative.can`t you see it yourself?It is obvious from your own chart sample.
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What? Are you talking about that indicator just below the chart?

That is not predictive in the least... It's a confirmation/compression indicator... It tells me how far price is compressed up/down.


The up/down arrows on the chart just indicate that the market is reaching compression levels which odds are it will push above/below in the near term depending upon market momentum.
 
Quote from ocean5:

Sorry,i was confusin the upper and lower panes.The one below is looking more leadin - true.
More...

You need to look at the vertical lines...

Here I have drawn circles so you can obviously see where the market turns expectedly.


A few of the recent turns could not have technically been predicted with a 4th derivative indicator with this level of noise stripping. The mario speech rally, and the jobs report rally.

News influenced the market technicals heavily at those two points.
 

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Ugh... I'm tired and going to sleep.

Technicals and indicators are really unimportant for trading for the most part. They are pretty and nice and make you feel comfortable and allow you to calculate odds out...


But in reality... All you need to do to trade successfully is short high enough and let it drop a bit and cover... Or buy low enough and let it rise a bit and cover.

Keep it simple! No need for technicals... Buy low, sell high. Sell high, buy low. At most you need a moving average, but in reality you can calculate out moving averages in your head just by looking at price...
 
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