Quote:
Originally Posted by akeakamai
I can appreciate what you are trying to do, but don't be so sure that stddev/variance will be so easy to figure out. The market is by nature prone to have bizarre spikes in prices, coinciding with spikes of emotion (fear/greed). This can be extremely difficult if not impossible to incorporate into a statistical model.
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Some trading platforms have a stddev indicator, so I think it's absolutely feasible to estimate it (and predict it to some extent) for a certain time frame. If sddev moves back and forth, I can use a sub-model to take that in consideration too.
Quote:
Originally Posted by akeakamai
But that isn't even my main point. What I'm getting at, is if price is moving because traders/investors are reacting to news/technical support&resistance and other factors that are unknown BEFORE they happen, why would you spend your time trying to predict those events. Don't you see that you are adding an extra step between the underlying cause of the movement and your eventual reaction to that movement.
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Like I said, I won't be using this strategy blindly, but I'll have to take into consideration fundamental analysis too (especially on when to enter a trade). However I still think it could result in a decent analysis tool to help decision-making.
Quote:
Originally Posted by akeakamai
Why not just learn how to model the average traders response to certain events (ie. encountering a resistance level), and profit that way? Trying to account for the market's total volatility, at all hours of the day, seems extremely futile to me.
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I don't really know much about FX, but I tend to think that the effects of traders psychological response have diminishing effect on larger time frames, so my model would be more accurate in intra-day trading. However I see your point... you're right, I should consider the hour of the day too.
Well, I better go back to studying now
. But thanks, you gave me some very good inputs.