How To Quantify Price Action?

[addchild 10]

ADDChild,

 

Thanks a lot for this I really appreciate it! this is exactly what i was looking for!

 

Do you trade like this? I recall you replying back in regards to another one of my posts about stats

 

It's just a way of modeling price movements, so you can't trade it per say. But I use something similar to an ARMA model for intraday, outright trading. Although ARMA is definitely on the simpler side of financial modeling, its easily altered and adapted for everything I have to throw at it.

[Tradewinds 12]

Since you are using thinkScript, this may be of interest to you.

 

Least Squares Method. Yahoo ThinkScript Group

 

Least Square Method. Wikipedia

 

#This program created by tradescripter
#Dec. 24, 2010 Merry Christmas
#It uses the Least-Squares Method to forecast a new price
#For an explanation of Least-Squares method see:
#http://en.wikiversity.org/wiki/Least-Squares_Method

input length = 9;input price = close;
def AvgPrice=average(price,length);
def SumTime=fold i = 1 to length + 1 with x = 0 do x + i;def
AvgTime=SumTime/length;
#sx is the sum of all the deviations from time for the last x bars
def sx=fold j = 1 to length + 1 with y = 0 do y + ((j-AvgTime) *
(getValue(price,length-j,length+1) - AvgPrice));
#sy is the sum of all the deviations from price for the last x bars
def sy=fold k = 1 to length + 1 with z = 0 do z + (power(k-AvgTime,2));
#m is the slope of the line, b is the slope intercept of the line in the
equation y = mx + b
def m=sx/sy;def b=avgPrice-m*AvgTime;
plot FuturePrediction=(m*(length+1))+b;

 

This code was also posted in the Thinkscripter site, and improved upon by others.

[sergso 10]

Hey Bobcollett when I say quantify I'm refering to trade in a sense that is as scientific as possible.

 

What sparked this interest was when I stumbled across Price Action Lab Blog | Quantifying Market Price Action - However, I have 0 desire in paying absorbant amounts for a system. I want to understand price action better with the use of math

 

Thanks. He does it seems a nice job in gratifying chance. I like very much his idea of using portfolio backtest statistics for this like in his latets post: Price Action Lab Alert for Monday, December 17, 2012 | Price Action Lab Blog

 

I wonder is this can be automated in a way.