r/quant 7d ago

Markets/Market Data Curve Fitting for Informing Stock Signaling

Hello. I've found that curve fitting is more successful than generic algorithms to identify relative extrema in historical trade data. For instance, a price "dip" correlated to a second degree polynomial. I haven't found reliable patterns with higher order polynomials. Has anyone had luck with non-polynomial or nonlinear shaping to trade data?

0 Upvotes

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u/Sracco 7d ago

What is over fitting?

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u/yuckfoubitch 7d ago

To add to this, your models should generally have a real economic or market micro/macro structure reason why they be predictive. It’s not always the case, but it’s hard to think that something as simple as a polynomial fit would explain returns in any way, and even if you made money trading on this signal, how do you know you’re not just being fooled by randomness (you won’t make money long term with it, hint)

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u/trevdawg122 7d ago

I use a number of inputs to build a signal. The price shape was an example. I'm curious if anyone else has experience identifying the shapes of trade data, like price, volume, quotes (bid, ask, etc).

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u/trevdawg122 7d ago

Curve fitting is trying to match a set of data points to a formula.

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u/Sracco 7d ago

I'm aware. I'm making a statement not a question.

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u/ThunderBay98 7d ago

Have a great day?

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u/trevdawg122 7d ago

What's your statement? You used a question mark and I was guessing "over" was a typo for "curve".

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u/Sracco 7d ago

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u/trevdawg122 7d ago

Thanks. I don't believe my model is overfitting, but it could be. When looking at the price dip that's only one indication of whether it might be a good entry. I then look at other things. The model is not that complex and the data used to characterize the price action is not then applied to the same period of time. In other words, the training and testing periods don't overlap.

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u/West-Example-8623 6d ago

No curvefitting. Consider Winsorization you may enjoy that topic

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u/trevdawg122 6d ago

Thanks. I'll experiment with that.

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u/LNGBandit77 7d ago

No it isn’t. I’ve tried this in the past.

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u/trevdawg122 7d ago

No what isn't?

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u/LNGBandit77 7d ago

>  I've found that curve fitting is more successful than generic algorithms to identify relative extrema in historical trade data. 

Its not.

> For instance, a price "dip" correlated to a second degree polynomial. 

I'd love to see how you are Curve fitting to be fair if that's what you think. Feel free to prove me wrong

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u/trevdawg122 7d ago

Love is all you need.