Technical Analysis (TA) is a methodology used to forecast price direction based on the study of past market data, primarily price and volume. There are 4 major components of TA.
1. Patterns. TA Patterns include; Line chart, Chart Patterns (e.g. Flag and pennant, Head and shoulders) , Candlestick patterns (Simple and Complex).
2. Concepts. TA Concepts include the Cycles, Elliott wave theory, Breakout, Dead Cat bounce, Dow theory, Trend, Fibonacci ratios, Average True Range.
3. Indicators. The myriad of TA Techncal indicators can be categorised as Support & resistance, Trend, Momentum, Volume, Volitility, and breath indicators.
4. Charts. TA Charts include line charts, Candlesticks, Renko, Kagi, Line, Open-high-low-close, Point and figure. Open-High-low-Close.
Market structure is understood by analysing the following indicators:
- Price Trennds
- Chart Patterns
Considerable computation is required to predict likely price action and there is no guarantee of constant success due to market volatility.
AI is also used to scan the market, continuously, looking for 'anomalies'. This can provides warning of market manipulation. CyberTrade does propose to use AI to provide some protection against manipulation by whales and market makers.
CyberTrade is a strong proponent of Cybernetics . In particular, the beneficial interaction of Human Intelligence (HI) and Artificial Intelligence (AI).
A new trend in cryptocurrency is to automate trading as far as possible. However, in practice, there are distinct and valuable advantages in combining HI and AI to produce best results / profits overall.
The cycle concept represents long term cycles often accociated with the macro environment.
The Elliott wave principle highlights investor psychology moving between optimism (impulse) and pessimism (correction) in natural sequences.
Impulses are described as a set of 5 lower degree waves. Waves 1, 3 and 5 are impulses. Waves 2 and 4 are corrections. Wave 3 is usually the most powerful.
A fractal geometry pattern enables the phenomena to be cascaded down to lower order waves.
Mathematically, Elliott wave principle correlates well with finonacci ratios.
Candlestick charts are used to illustrate price movements. They can plot on different intervals, from minutes, to months. Each candlestick depicts open, close, high low, prices.
Linecharts are used to illustrate market structure by plotting moving averages and with lines of support and resistance.
Chart data is a major input into the trading engine, both to give 'context' to trading and also to help identify entry and exit points.
The two main categories of patterns are Chart patterns and Candlesticks.
Chart patterns include:
- Head & Shoulders,
- Cup & Handle
- Double Tops & Bottoms
- Rectangle Tops & Bottoms
- Rounding Tops
Chart patterns are are invaluable in technical analysis because they are able to highlight naturally occurring, repeating patterns, each of which have well known possible outcome(s).
CyberTrade believes that AI based pattern recognition is a potential game changer, because it helps to group many individual candles into useful signals for the trading engine.
TA Techncal indicators can be categorised as Support & resistance, Trend, Momentum, Volume, Volitility, and breath indicators..
Indicators that exist in each category, are generally combined within a trade strategy. CyberTrade intends to use dynamic trade strategies which change to reflect market conditions.
The CyberTrade design wraps sophisticated functionality, within easy-to-consume trading services.
Such services being consumed through a simple application programming interface (API).
The nature of system design, lends itself to internal implementation in an object-orientated programming language, providing polymorphism, Inheritance, Encapsulation and Data Abstraction.
The system shall be deployed as a family of trading services which can be consumed using an API by applications running on smart phones, tablets, PC, and even in web pages as messaging apps etc.