The problem with a polynomial approach is that it really assumes that the price-time-series can be described by a continuous function. However, price behaves in a different way, as it is takes a fractal structure. So my first reaction to that idea is negative, but of course, I can be wrong.
Best, check it and make various backtests by using it, and you will know.
In the video he finds 10 recent price patterns similar to the current one and averages the results of what happened next. It seems questionable to me that this information would have any bearing on what happens next, or if it does, whether 10 examples is enough to be meaningful.
He doesn't even actually claim that it has any utility in trading, though, or show any backtesting results.
Is this actually time based? He states that it works just as well with any type charts. It appears he is comparing like polynomial equations from the slope of the line over a certain length. He does say that he has only tested this for the last 3 months. So no his history is limited.
I just think it is a unique approach to look at the market. Plus could this be a way to measure price action? If the slope of a line that forms a head and shoulder pattern can be measured and similar can be found using the same slope.... doesn't this give us a trade able pattern? A cup and handle? Double top or double bottom?
I don't know I am not that smart...I leave this to the Fat Tails and Big Mikes of the group....but it does make some sense?
It is not backtesting and it does not substitute for backtesting. The indicator
-> analyzes past price action to fit into a simple pattern structure
-> it then compares recent price action with the detected historical patterns
-> if the recent price action is matched by 50 simple historical patterns the indicator will calculate an average from the 50 possible outcomes
-> the average will be projected into the future and used as a forecast
Let us look at it like this:
If 100 boys sleep with their girlfriends 50 times without using contraceptives, the indicator detects that half of the girls are pregnant and half of them are not. Using this knowledge, it will then make a prediction what will happen to your daughter, if you leave her alone with her boyfriend.
The indicator will duly predict: HALF-PREGNANT.
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