Not really sure how the quants measure Support/Resistance and Pivot Points but I would love to learn more. Anyone have any suggestions on what papers or books to read?
Oct 31, 2012
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I found this one: Zapranis et al. (2012), Identifying and evaluating horizontal support and resistance levels: an empirical study on US stock markets I didn't know there was a way of measuring them though.. I thought you just looked at the chart and guessed approximately based on previous levels
Tried taking a look at the article couldn't couldn't open it though... maybe its on Jstor
I've never heard of a quant performing technical analysis.
Paper titled: "AUTOMATED TRADING WITH BOOSTING AND EXPERT WEIGHTING" (I can't post links yet so just google it)
They use "simple and exponential moving average, Bollinger bands, acceleration, momentum, rate of change, moving average convergence divergence, relative strength index, stochastic oscillators, Williams indicator, money flow index, on balance volume, accumulation/distribution line, Chaikin oscillator, negative and positive volume index, and price-volume trend" with several more quanty layers on top.
Very cool paper! Thanks for giving me the heads up. I love reading up on this sort of thing.
That being said, come on man, this is hardly an example of quants utilizing technical analysis. This is a ridiculously sophisticated trading system. Technical analysis is used as the method of "learning" of the different agents developed within the system. This is as much "technical analysis" as it is "addition & multiplication," both are present within the system, but to refer to it in it's entirety as either would be silly.
Still though, thanks for the heads up on the research!
quant trading != technical trading
Quant trading is extremely diverse, and while technical analysis doesn't usually have much presence in a quant trader's arsenal, there are several quant trading strategies that rely heavily on systematic technical analysis techniques that are automated. Of course, by this I am not suggesting that connecting two points across a screen, or a variant thereof, can give you an edge over multi-billion dollar funds employing PhDs in a range of technical disciplines.
This is by far one of the most interesting papers I've read on the subject matter: http://web.mit.edu/wangj/www/pap/LoMamayskyWang00.pdf
With regards to support/ resistance and pivot point based quant strategies, Crabel Capital Management, a prominent quantitative fund founded by ex-Niederhoffer trader Toby Crabel, uses those techniques extensively.
I personally find most of this support, resistance, pivot points, double top, head and shoulders, crouching tiger hidden hidden dragon garbage useless, primarily because it is extremely difficult to rigorously test such patterns that are founded on perception.
Thanks for sharing this paper Macro. I had a prof who was madly in love with Andrew Lo and Technical Analysis lol. Still need to read a nonrandom walk down wall street at some point
In regards to market dynamics though, generally once price falls into a certain range intraday, momentum/volume dissipates until the beginning of the next move. I was wondering what kind of tools quants may use to determine the probability of the next move up or down or is it anyone's guess intraday since there is so much noise in the data...?
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