Index forecasting models

Trajectory Forecasting algorithm

Background

This model was developed as a by product of a project that I was working on for a health care company specializing in hospital care. At the company I was investigating the optimal way to allocate nurses in hospitals to minimize cost to the company, as well as provide adequate care to the patients. During this process the idea for the trajectory algorithm was developed. 

Basics of how its works

The model makes use of mathematical formulas to identify trend and seasonally in number patterns. The algorithm is allowed to use 56 variables all affecting the output in different ways. The algorithm runs selecting the number of variables and the sizes of each dynamically over iterations to arrive at a final answer. 

What you need to know 

What must be stated is that this model is no guarantee nor is it claiming to predict the future. Its purpose it to provide an objective trajectory forecast based on past numerical data. 

The orange line is the actual index value movement for the last 250 trading days.

The blue line is the forecasted index value for the last 250 trading days. The point at which the orange line stops is where the forecast model starts its prediction for the next 30 trading days.

The green line is half a standard deviation of the index subtracted from the forecast data with a 6 day moving average. likewise the red line is the standard deviation of the index added to the forecast data with a 6 day moving average. 

Combined the top and bottom standard deviations are referred to as the "cloud" and once the 30 day forecast starts the standard deviations are referred to as the "forecasting cloud". This cloud is a confidence band that gives the user an absolute range in which price movement should occur. In periods of lower volatility the cloud will be narrower and in periods of high volatility the cloud will widen.

For a print out of the numerical calculations

https://www.dropbox.com/s/w9nmh8iukj49biq/Code%20output%20for%20trajectory%20indicator.pdf?dl=0  

Model 1

Link: https://engineeringtrader.blogspot.co.za/2016/07/trajectory-forecasting-algorithm.html

The data for this model was run on the 6-05-2016