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Fourier Transforms are used to detect cyclical patterns within price movements. A subdivision of spectral analysis (used in general engineering), Fourier transforms can be used to extract dominant cycles from any data series (e.g. price or an indicator). The general principle is that you can approximate any finite time series by breaking the data down into a set of harmonic sine waves of differing pitch. Usually, analysis of security data needs to be 'detrended' before a Fourier Transform is any use. Day trading with Fourier Transforms may be difficult because of the calculations required. If you want to try this in a dy trader's timeframe, youwill need to configure your software for 'Fast Fourier Trasforms'. |
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