Computer graphics processing and selective visual display system – Computer graphics processing – Graph generating
Reexamination Certificate
2002-12-17
2004-10-05
Luu, Matthew (Department: 2672)
Computer graphics processing and selective visual display system
Computer graphics processing
Graph generating
C705S03600T
Reexamination Certificate
active
06801201
ABSTRACT:
FIELD OF THE INVENTION
The present invention relates generally to technical analysis. More particularly, the present invention relates to a method of chart markup and annotation in technical analysis.
BACKGROUND OF THE INVENTION
Technical financial analysis, as opposed to fundamental analysis, uses the past price, volume activity, or other measures of a stock, or of a market as a whole, to predict the future direction of the stock or market. Technical analysis can also be applied to other time series such as medical data, electrocardiogram results, or any other data that can be presented as a time series, and in which it is desirable to identify turning points, trends, formations or other information. The results of a technical analysis are usually shown in charts or graphs that are studied by technical analysts to identify known trends and patterns in the data to forecast future performance. Recognizing patterns in the charts and graphs is greatly enhanced by efficient pattern recognition and automated chart annotation.
A number of terms of art are used in the present specification. An inbound trend is a series of higher highs or lower lows that lead into a price pattern. An indicator is a calculation based on stock price and/or volume that produces a number in the same unit as price. An example of an indicator is the moving average of a stock price. An oscillator is a calculation based on stock price and/or volume that produces a number within a range. An example of an indicator is the moving average convergence/divergence (MACD). A price chart is a graph of a company's share price (Y-axis) plotted against units of time (X-axis).
The terms technical event, and fundamental event are coined terms to denote points such as the price crossing the moving average or the MACD crossing the zero-line. The technical event or fundamental event occurs at a specific point in time. The importance of most indicators and most oscillators can be represented as technical events. A technical event, as used herein, is the point in time where a stock price has interacted (e.g. crossed or bounced) with an indicator or a price pattern or an oscillator has crossed a threshold. There are other techniques that technical analysts use to interpret price history as well that can be represented as technical events. These, however, are more subjective and involve the subjective recognition of price formations or price patterns. Fundamental events are the point in time where a stock price has interacted (e.g. crossed or bounced) with a price value computed from company accounting and/or other economic data.
A price formation, price pattern or chart pattern is a pattern that indicates changes in the supply and demand for a stock, which cause prices to rise and fall. Over periods of time, these changes often cause visual patterns to appear in price charts. Predictable price movements often occur follow price patterns. A reversal pattern is a type of price pattern that is believed to indicate a change in the direction of a price trend. If prices are trending down then a reversal pattern will be bullish since its appearance is believed to indicate prices will move higher. Examples of bullish reversal patterns include double bottoms and head and shoulder bottoms. Similarly, if prices are trending up then a reversal pattern will be bearish. Examples of bearish reversal patterns include double tops and head and shoulder tops.
Graphs of time series, for example financial time series, sometimes exhibit specific formations prior to moving in a particular direction. Some relevant price formations have been described by a number of authors, including Edwards, R. D. and Magee, J. “Technical Analysis of Stock Trends” ISBN 0-8144-0373-5, St. Lucie Press 1998 and Murphy, J. J. “Technical Analysis of the Futures Markets” ISBN 0-13-898008-X, New York Institute of Finance 1986. To anticipate the likely behaviour of some time series, it is advantageous to be able to recognise predictive formations as soon as they occur. Many predictive formations share a common characteristic of being capable of representation by a stylised zigzag line, or by connecting the pivot points of the zigzag lines. Explanations given in Murphy, supra, are largely framed around this concept.
One well-known technique in technical analysis is point and figure charting. In point and figure charting, the price of, for example, a stock is plotted as columns of rising X's and falling O's to denote price movement greater than, or equal to, a threshold amount, denoted a box size. Unlike other charting methods, such as open, high, low, close (OHLC), bar or candlestick, where price action is plotted according to time, point and figure charting is time independent and price, not time, dictates how point and figure charts take shape. For example, a series of volatile trading sessions over the course of a week could fill an entire page or screen in a point and figure chart, whereas a month of inactivity or static range trading might not be reflected on the chart, depending on the chosen box size. The box size determines how much background “noise” is removed from the price action, and, hence, the granularity of the resulting chart. The factors that typically influence the choice of box size include volatility and the time horizon being examined.
The technique of conventional point and figure charting is described in detail in Kaufman, P. J. “Trading Systems and Methods” ISBN 0-413-14879-2, John Wiley & Sons 1996. In summary, a box size, datum price and datum time, are chosen. If a new high exceeds the sum of the current datum plus a box size, and X is written in a column and the datum price shifted to the datum plus box size. When the market reverses by more than some multiple of the box size, a column of Os is formed, and continues in a similar manner until the market reverses by more that the prescribed multiple of box sizes. One attractive feature of point and figure charting is the fact that conventionally accepted chart formations used in technical analysis, such as double tops and triangles, can be clearly identified. Buy signals can be generated when prices surpass a previous bottom pivot point by one or more boxes, and the reverse for sell signals. This eliminates much of the subjectivity of other analysis techniques. However, it is much easier for users to view the results of such a technical analysis on a conventional time-based chart.
Another technique also known is to use a neural net through which open-high-low-close-volume data (i.e. the data stream) flows to recognize pattern formations. If the incoming data stream represents a pattern that the neural net has been trained to recognize then a “switch” gets flipped by the data point in the stream that confirmed the pattern. At this point the neural net reports a numerical value that represents the level of certainty that it associates with the existence of the pattern. Thus, if it “sees” a pattern that it is less certain of the numerical value will be small (e.g. close to zero), whereas, if it seems a pattern it is sure of then the value will be high (e.g. close to one).
Given this simple view of a neural net, one can understand that the neural net has no knowledge of the position or scope of the pattern other than to say that it was confirmed at the point in time associated with the data point that triggered the switch. Thus, in order to obtain markup to annotate a pattern additional information or a different approach is required.
Currently, there is no way to automatically map the results of pattern recognition based on pivot point determination or neural net recognition to a conventional time series chart, and to provide relevant annotation based on the recognition. It is, therefore, desirable to provide a method for automatically generating markup and annotating a chart based on previously recognized patterns and trends in the underlying data.
SUMMARY OF THE INVENTION
It is an object of the present invention to obviate or mitigate at least one disadvantage of previous methods for c
Borden Ladner Gervais LLP
Kinsman L. Anne
Luu Matthew
Recognia Incorporated
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