> There is one more difference in LaViola's apporach to that of JBT. The
> scaling coefficient alpha/(1- alpha) in front of the difference in EMAs in
> Eqn. 3. Would be interesing to see if that coefficient makes any difference
> in forecasting.
> **
>
In JBT, the computed derivative is not used to forecast the time series, so
the absolute value is irrelevant. Ultimately, the derivative is compared
against some threshold, and a trading decision is made, as in:
if (tension <= -entry) {
setPosition(-1);
}
Since the "entry" parameter is optimized anyway, there is no need to scale
the computed derivative. That is, the effect of
if (tension <= -entry) {
setPosition(-1);
}
is the same as
if (tension/constant <= -entry/constant) {
setPosition(-1);
}
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