Wavelet Analysis

Peter said...

Classmates here knew that I was intrigued by "wavelet analysis" of stock chart and have been looking for resources to experiment.

I have found a site that offers such product with more advanced techniques than I initially envisioned, such as pre-regression, multiple smoothing algorithms and automatic seasoning identification in addition to the core FFT process.

The site offers a demo on daily chart, and it looks it went through the recent history with remarkable accuracies on stocks I've tested.

To the mkt's near future, interestingly enough, it PERSISTENTLY points to a big rally. Unlike most, if not all, TA indicators in time domain which changes/adjusts instantly as time goes, frequency domain based analysis seems to be constant and not influenced by day-to-day, hour-to-hour events, news, and market jitters - only time will tell its effectiveness.

I have been following it for only a week, so I'm waiting for it to prove itself. You can take a few test drive too if you like. Here is the link.

http://www.ipredict.it/OnlineDemo.aspx

I traded two hands of FAS yesterday, partially because the site's prediction on FAS. but each time was stopped out by its new lower lows. I realized that I was against the intraday trend, in which the stops are difficult to set - there were few opportunities that I could find an entry and instantly be able to stop loss at or near my cost.

So even my short-term (one to two weeks) view on the market and financial is bull biased (could be completely wrong), I've decided not to DT against trend. I will trade the chart, not the prediction. I had three hands of FAZ today and the entries were easy, two wins and one push. Each time I was able to set stops at or above my cost, even with the 3x power.