Mar

28

Wave Periods, from Jim Sogi

March 28, 2015 |

One very significant and predictive element of surf forecasting is the period of the swells.

NOAA Wavewatch [latest pacific waves forecast]

The period is the time between the peaks of the waves and can determine the eventual size of the breakers, the power, and the quality. Higher periods mean faster and better waves. A smaller wave with a long period is often better then a big wave with a short period which is choppy.

I wonder if market price periods might have some predictive value. Survivorship analysis is one way to look at it. Time between events, max and minima time periods seem productive looking forward. An idea is along the lines of the longer time between max/min the more the amplitude as in waves in water. Would shorter periods mean more "chop" with less favorable trading conditions. Would longer periods predict larger amplitudes or more vol and good trading?

Ed Stewart comments:

I think there is something to it. The tricky part is sometimes one can identify wave periodocity that they won't let you profit from - they let you in on the bad trades every time but not often enough on the good trades. Yet is can be very enticing if one does not consider that factor beforehand.

For example. A friend told me his firm "shut off" their computers due to going outside their risk parameters, and what do you know the periodicity during that period was highly profitable with the type of very fast reversals and squeezes from extremes many short term traders thrive on. Huge volume still but a low level of resting orders. Made me consider that when composition of the participants change the character of price formation changes substantially.

Stefan Martinek says:

High/low pressure areas drive weather patterns. Pressure can be quantified in markets as well. We can fix a time unit and measure the price pressure, or we can fix a price unit and measure the time pressure. Price and time are non-linear. To manage just one dimension seems enough.

A few years back we sailed to Corsica [island in the Mediterranean] when Mistral [strong northwesterly wind] arrived. All was very predictable: Short chopping waves, everyone threw up 10-20 times except captain, and it went for two days. I never sailed between Europe and the US, but some claim that it is the most predictable journey due to Passat winds.


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  1. anonymous2 on March 28, 2015 7:05 pm

    Much work has been done in this general area. Here’s just one example:

    http://hurstcycles.com/#sthash.cOwGozuN.dpbs

    I have no connection to the Hurst people (or anyone) and I have nothing to peddle, nor do I recommended using Hurst cycles (or anything), though I have found them sometimes helpful in an eclectic system of nesting pivot points over daily and weekly time frames.

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