How to "uncluster" a set of financial data?
How to "uncluster" a set of financial data?
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Mike Furlender · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: Mike Furlender
Original post: https://quant.stackexchange.com/questions/1947
License: CC BY-SA 3.0 — https://creativecommons.org/licenses/by-sa/3.0/
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I am attempting to evaluate and compare the profit factor of different "test runs" of a FOREX trading strategy.
My problem is that, despite an average time between orders of 2hr+, some of these runs can have 20+ orders in a row, every 5 minutes, in the same direction. I need some way to normalize these clusters that occur without just throwing the data out.
I want to treat the cluster as 1 data point by averaging the gain/loss of each trade within the cluster.
I was thinking of doing it with a moving time window in the following manner:
For each order:
Weight = 1/(N+1)
N = count of consecutive orders within 30 minutes of the current order.
But I am not sure if that is correct.
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