The price trend concept perhaps is a quintessential thought within technical analysis and in general for trading. The capability for identifying trends in price is specifically essential for 2 essential reasons. Firstly, trades require trading with their trend and riding the trend as much as is possible. Traders secondly need to predict the reversals of trend so as to establish good positions of entry and exit wherein it is essential to establish the trend preceding it.
A trend in a particular time series formally is a prolonged time period wherein X increase or decrease is fast than the average historically. A common approach is used for identifying the time series trending direction which first lies in creating a smooth representation which in a rough manner also describes what X is. The first difference of G can be calculated and the trend then is said to have established within intervals where sign of initial difference has constant rate.
Filter for Hodrick-Prescott is a mathematics based tools utilized in macro-economies for creating a smooth non-linear time series representation which has less sensitivity to short term modifications than modifications in the long term. The filter further takes up to assume that any considering time series can be classified into trending components and cyclical components as well as expressed through the sum. Then the cyclical component can be obtained through t-x given that c= x- T. The ct cyclical component and Tt trend component can get isolated by solving the minimization issue as provided below:
Where the initial equation term is the total squared deviation sum and the second term is the contrast of trending components.
Furthermore the fitness function needs to have objectivity and graded phenotypes evaluations. Evaluation through grading is essential as the strategies of selection and progress consequently in the cycle of evolution will not stagnate if the whole population is equal relatively to fitness of entire variable of significance. As the strategy for investment represented through a phenotype is related to individual stock, it is essential for traders to purchase as much shares as is possible using the present investment capital available on each purchase signal and sell every share presently owned by the stock on each selling signal. Therefore, it is essential to either place the money over stock or no money placed within the stock itself. The value for stock prediction therefore is possible when technical analysis is involved.