This is not exactly correct Eugene. First derivative of price must be positive for rising prices and negative for falling prices.
Velocity, as it is computed, can be negative for rising prices as well. For example, consider the following faux price series: 10, 9, 8, 7, 6, 5, 4, 3, 4, 5, 6 Compute simple long term average (all 11 points): 6.1 Compute simple short-term average (last 4 points): 4.4 The difference between short - term and long term averages is negative: 4.4 - 6.1 = - 1.6 Yet, the short-term prices are rising: 3,4,5,6. Exponential moving average will weigh more the recent trends, but the above situation is still possible. ________________________________ From: nonlinear5 <[email protected]> To: [email protected] Sent: Thu, December 23, 2010 8:21:50 AM Subject: [JBookTrader] Re: peak and reversal detection -> help needed Look in that thread that Shaggsthestud referenced: http://groups.google.com/group/jbooktrader/browse_thread/thread/dc533e1d2566d1df# No advance math knowledge is required. It's actually quite straightforward. Given a signal (such as a series of prices), the difference between the shorter-term EMA and the longer-term EMA approximates the first derivative of the price and represents the velocity. Now, if you take the resulting velocity signal and calculate difference between the shorter-term EMA and the longer-term EMA on *that* signal, it would be the second derivative of a price, which in the physical world is known as acceleration. You can probably sense that you don't have to stop there. What's the third derivative? It's called a "jerk". :-) On Thursday, December 23, 2010 9:08:49 AM UTC-5, new_trader wrote: > more practical solution is to compute the acceleration (i.e., the second >> derivative of the Tension). The peak is where acceleration is near 0. The >> calculation would be an O(1) operation, as the only thing that would be >> involved is differencing the EMAs. >thanks for the reply! >any hint on how to do differencing the EMAs? >I am so sad that I am no math genius :-( >-- 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. -- 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.
