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Attachments: Detecting Fake Price Movements - Convergence Divergence Indicator
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Detecting Fake Price Movements - Convergence Divergence Indicator

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  • Post #1
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  • First Post: Edited May 19, 2017 12:17pm May 7, 2017 9:28am | Edited May 19, 2017 12:17pm
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Thread Closed.
  • Post #2
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  • May 7, 2017 10:59am May 7, 2017 10:59am
  •  Fernand
  • | Joined May 2016 | Status: Member | 114 Posts
hi, i use this indicator
Attached File
File Type: mq4 _Correlation IND HSTlite.mq4   7 KB | 828 downloads
 
 
  • Post #3
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  • May 7, 2017 11:09am May 7, 2017 11:09am
  •  OrdrFlowEdge
  • | Joined Dec 2010 | Status: Junior Member | 1 Post
Fake price movement? I don't understand this term. Anytime price moves - it's real - there's a reason behind every single price move that occurs in the market.
 
2
  • Post #4
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  • May 7, 2017 12:40pm May 7, 2017 12:40pm
  •  Anusragger
  • | Joined Nov 2012 | Status: No Impact Member (bottom 1%) | 740 Posts
I like Bill Williams.
 
 
  • Post #5
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  • May 7, 2017 12:45pm May 7, 2017 12:45pm
  •  Anusragger
  • | Joined Nov 2012 | Status: No Impact Member (bottom 1%) | 740 Posts
Nice eh?
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1
 
  • Post #6
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  • May 7, 2017 1:00pm May 7, 2017 1:00pm
  •  aaven
  • Joined Jul 2015 | Status: Member | 2,277 Posts
Quoting samsha786
Disliked
THREAD RULES: If you discuss or attach anything unrelated to this thread you will be banned. Please read the provided pdf. Make sure you understand and have context. We look at developing a new pair trading method to detect fake price movements and arbitrage opportunities that is based on a convergence/divergence indicator (CDI) belonging to the oscillatory class. The proposed technique is applied to a cross-currency pair EURAUD and trading rules based on CDI signals are obtained. The CDI indicator is shown to outperform others of the oscillatory...
Ignored
Sounds Interesting Samsha. Subscribed.

Good Luck!
 
 
  • Post #7
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  • May 7, 2017 1:35pm May 7, 2017 1:35pm
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting aaven
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{quote} Sounds Interesting Samsha. Subscribed. Good Luck!
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Thanks!
 
 
  • Post #8
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  • May 7, 2017 2:00pm May 7, 2017 2:00pm
  •  steve2010
  • | Joined Jan 2016 | Status: Member | 105 Posts
I've tried some variations on these strategies but have not had much luck. I will have a look at your indicator requirements though and see if I can help. I did not know people actually wrote thesis on this stuff... being a scientist, I find it exciting to see a well researched strategy like this.
Better to run, than curse the road
 
 
  • Post #9
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  • May 7, 2017 2:01pm May 7, 2017 2:01pm
  •  packgreen49
  • | Joined Oct 2006 | Status: Member | 175 Posts
You need to give us more information of changes to make for the indicator. I think maybe the indicator levels might be off by a digit?
 
 
  • Post #10
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  • May 7, 2017 2:17pm May 7, 2017 2:17pm
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting steve2010
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I've tried some variations on these strategies but have not had much luck. I will have a look at your indicator requirements though and see if I can help. I did not know people actually wrote thesis on this stuff... being a scientist, I find it exciting to see a well researched strategy like this.
Ignored
Hi Steve

Welcome! Thanks for joining the thread. As the indicator on which we will base our strategy is well documented, backed by research and historical findings - there must be some merit to it. This is a play on statistical arbitrage, which implies that it should give us some kind of edge.

You being a scientist makes it all that more exciting
 
 
  • Post #11
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  • May 7, 2017 2:19pm May 7, 2017 2:19pm
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting packgreen49
Disliked
You need to give us more information of changes to make for the indicator. I think maybe the indicator levels might be off by a digit?
Ignored
Hi Packgreen

Welcome! What specifically are you looking for? After you calculate correlation for the 90 day and 24 hour periods - you should end up with values between 0.0 and 1.0. The correlation calculation ensures this. Here's a simple explanation of correlation:

https://www.mathsisfun.com/data/correlation.html
 
 
  • Post #12
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  • May 7, 2017 2:37pm May 7, 2017 2:37pm
  •  DirkH143
  • | Joined Sep 2008 | Status: Member | 648 Posts
In order to program this indicator, you need a formula and something to go on. The pdf does not say too much.
D.
 
 
  • Post #13
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  • May 7, 2017 3:06pm May 7, 2017 3:06pm
  •  steve2010
  • | Joined Jan 2016 | Status: Member | 105 Posts
Quoting DirkH143
Disliked
In order to program this indicator, you need a formula and something to go on. The pdf does not say too much. D.
Ignored
Well, it seems to just use correlation determined over two separate periods. It should basically be this stuff: https://en.wikipedia.org/wiki/Pearso...on_coefficient
I'll try code it tomorrow after work and see
Better to run, than curse the road
 
 
  • Post #14
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  • May 7, 2017 3:57pm May 7, 2017 3:57pm
  •  sevan62
  • Joined Nov 2015 | Status: Coder | 510 Posts
Quoting samsha786
Disliked
... We look at developing a new pair trading method to detect fake price movements and arbitrage opportunities that is based on a convergence/divergence indicator (CDI) belonging to the oscillatory class. ....
Ignored
Hi samsha,
Your approach looks interesting and promissing. Exploring correlation I've also noticed that it gives some beautiful signals. You may read my findings here and have a look at some screenshots. There is also my Pearson correlation indicator attached to this post which you may use.
Here are my comparing conclusions Pearson vs Spearman correlation.
I'll study deeper your CDI pdf and try to contribute a bit later.

Quoting samsha786
Disliked
{quote} ... This is a play on statistical arbitrage, which implies that it should give us some kind of edge.
Ignored
Statistical arbitrage is based on cointegration which is different from correlation.
BR, alex
 
 
  • Post #15
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  • May 7, 2017 4:01pm May 7, 2017 4:01pm
  •  profitkeeper
  • Joined May 2010 | Status: Member | 377 Posts
Looks very interesting.
In the detail appendix of the PDF it shows a return of approx 5% total in 3 years, which is only about 1.6% a year. Am I reading this correctly?
Still I think it is worth following up, maybe with shorter time frames.
Have you tried asking the authors if it is possible to get a copy of their indicator?
 
 
  • Post #16
  • Quote
  • May 7, 2017 4:20pm May 7, 2017 4:20pm
  •  Hurst
  • Temporarily Suspended | Joined Aug 2014 | 1,877 Posts
Nice idea, I am watching closely.
 
 
  • Post #17
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  • Edited at 1:48am May 8, 2017 1:22am | Edited at 1:48am
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting OrdrFlowEdge
Disliked
Fake price movement? I don't understand this term. Anytime price moves - it's real - there's a reason behind every single price move that occurs in the market.
Ignored
Hi

What do we mean by fake price movement?

If for the past 90 days 2 securities have a high positive correlation (move in same direction) of 70% or more then if within a 24 hour period they diverge (move in opposite directions), that is an indication of a temporary move - they are most likely to become positively correlated again.

If for the past 90 days 2 securities have a high negative correlation (move in opposite directions) of 70% or more then if within a 24 hour period they converge (move in same directions), that is an indication of a temporary move - they are most likely to become negatively correlated again.
 
 
  • Post #18
  • Quote
  • May 8, 2017 1:24am May 8, 2017 1:24am
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting sevan62
Disliked
{quote} Hi samsha, Your approach looks interesting and promissing. Exploring correlation I've also noticed that it gives some beautiful signals. You may read my findings here and have a look at some screenshots. There is also my Pearson correlation indicator attached to this post which you may use. Here are my comparing conclusions Pearson vs Spearman correlation. I'll study deeper your CDI pdf and try...
Ignored
Hi Sevan

Welcome! The attached paper refers to this method specifically as correlation analysis - unless I've misunderstood. Looking forward to your contributions.
 
 
  • Post #19
  • Quote
  • May 8, 2017 1:30am May 8, 2017 1:30am
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting profitkeeper
Disliked
Looks very interesting. In the detail appendix of the PDF it shows a return of approx 5% total in 3 years, which is only about 1.6% a year. Am I reading this correctly? Still I think it is worth following up, maybe with shorter time frames. Have you tried asking the authors if it is possible to get a copy of their indicator?
Ignored
Hi

Yes, I have attempted to contact these authors - unfortunately, no response. Remember, the article basically describes the CDI indicator to provide more accurate signals then the popular RSI. 5% in this context is irrelevant. Why? CDI will form the basis of our strategy, we will obviously be adding additional filters that make sense and we will employ some form of money management.

Baby steps! First let's create the CDI indicator. Remember, there is no "Magic Wand" or "Holy Grail", there are however tools which are better suited for particular situations.

We know from the attached paper that they ran a test with CDI by itself and it was profitable. So there is opportunity here to exploit and develop the idea further.
 
 
  • Post #20
  • Quote
  • May 8, 2017 1:32am May 8, 2017 1:32am
  •  samsha786
  • Joined Nov 2014 | Status: Member | 263 Posts
Quoting DirkH143
Disliked
In order to program this indicator, you need a formula and something to go on. The pdf does not say too much. D.
Ignored
Hi DirkH

Just to add to what Steve2010 has already posted, here's a simple explanation and example of the correlation formula:
https://www.mathsisfun.com/data/correlation.html

Excel also has a function called CORREL, which can be used to check if the indicator results are correct or not.
 
 
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