Progress on Metadata and TCDs

SO difficult!

When I find myself studying metadata and the resulting TCDs, I find myself struggling with a lot of philosophical, chicken-and-egg, and catch-22 type of issues.

Creating additional metadata is easy. Quite easy. The issue is analyzing it correcting and discovering what is “right” and what can be improved upon. I suppose first I should define how I view research in general.

The goal of research (for me) falls into two categories: Signals, and system/knowledge.
Signals: each signal has an absolute end: does the signal work or not? Is the bar recurrent or transient? Discovering strong signals (ones that don’t fail often) is difficult, but calculating whether or not your signal works is easy. You can set it with either a time control or pip control (stop loss) and at the end, you get a clean number. x% wins, y% losses.
System/knowledge: This type aims to take the information displayed through raw data, and strip it down to only what is necessary: highs, lows, critical points, etc. Things that fall into this category are like all the wave models I’ve created or market states.

SB TCDs clearly fall into the second category, and the issue with these types of analysis is that it’s hard to know if I’m right or wrong.

Since TCDs are based on raw data, they update as time progresses. The net end of a TCD is some sort of output, such as a number or translated into “long”, “short”, “flat”, “expand”.
Now, If my TCD is signaling “short” anywhere in the green box, is the information “correct” or not?

Capture

Clearly, the chart moves from an uptrend to a downtrend, and clearly the leftmost side of the box is capturing the end of the bull move. If I’m working on a TCD overfill signal that is suggesting that the longs are overfilled and a short movement is necessary, at what point is the signal considered correct? Given the nature of the market, an overfill, whether it be long or short, is bound to be correct at some point or another.

My conclusion from this was that “correctness” needs to be in conjunction or agreement with another TCD. But this leads to similar types of questions. If my signal changes from Sell to Buy, when do I buy? For how long? For how many pips? What determines if the baseline TCD is an accurate representation of price? Initially I thought it was possible to use something like the standard H-pL and pH-L. However to use these effectively, it seems like it’s simply morphing the chart into another chart. (from the standard OHLC time based chart to a TCD connected time based chart.

ok7k77

To take the chart from SB’s thread with the quote:

“Based on just these questions alone – I could look at this one chart alone and tell you that this currency pair was about to make a move Long for at least 80 pips (the harmonic average) and that it was going to do it within the next 24 hours.”

My issue is that historically I’ve seen stuff like this occur with other TCDs, but it has issues that I have with this chart as well:

1. Period 44 looks like a similar position where the Long TCD looks like it will cross the MA, but doesn’t.
2. Even if the long TCD DOES cross over the MA, it doesn’t mean that it will cross above the Short TCD and it looks highly likely that the Short TCD will still be higher.

I can think of some answers to these issues, but only in more general abstract ways. aka, to deal with point #2, develop a signal or indicator that will indicate when the short portion will be over so that the long portion may run. I see this as the following:
Tomorrow the day (starting from open) will see 80 pips up and 80 pips down with 75% probability. Based on this, you cannot successfully trade it. What you would have to do is to develop a way to know (or reasonably know) when the short or long portion will be over to trade the other side with good RR. On and on! Systems need to be developed to monitor other systems to monitor other systems that give output on what will possibly happen next. I believe that this is ACTUALLY how the “real” system works, but being able to develop these parts together yet separately is the catch-22 aspect that I struggle with.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s