In my 3 minutes of reading it looks like the Kalman filter is designed to better approximate the actual state of a system from a series of (erroneous) inputs. It sounds like the system needs to have a model, for instance... a rocket. A rocket is a well defined system, using the basic Newton equations of motion. For the stock market, you would first need a model, and then this technique would help you to better curve fit to that model.
Am I correct on this point? What would you use as your model.. some kind of momentum trading approach? This isn't exactly newtonian physics here... On Thu, Oct 21, 2010 at 5:21 PM, nonlinear5 <[email protected]>wrote: > > There are many flavors of Kalman filter. I think a plain vanilla > > implementation of scalar Kalman will be a big imporovement over > > Exponential Moving Average (EMA). Kalman filter has a lot of > > similarities with EMA and can be used in a similar way but it has one > > important advantage, - it adapts to changing conditions. In EMA the > > averaging coefficient is constant and, therefore, contribution of the > > new information to the average is constant. > > > > ,In Kalman filter the averaging coefficient it is variable and > > adaptive. > > Thanks for that explanation, this is very useful. Many indicators in > JBT use EMA for filtering prices and balances, so if Kalman filter is > an improvement over EMA filtering, we could substitute the EMA > components with Kalman components in the existing indicators and see > the impact on the strategies performance. The open source project > which I referenced above (http://jkalman.sourceforge.net/ ) is a Java > implementation of Kalman filter, so it should not be too difficult for > us to use it for JBT purposes. > > -- > You received this message because you are subscribed to the Google Groups > "JBookTrader" group. > To post to this group, send email to [email protected]. > To unsubscribe from this group, send email to > [email protected]<jbooktrader%[email protected]> > . > For more options, visit this group at > http://groups.google.com/group/jbooktrader?hl=en. > > -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/jbooktrader?hl=en.
