💡 INTRINSIC TIME is the secret to predicting financial markets!

Intrinsic time is one of the biggest discoveries in finance and will completely change how you predict prices in financial markets.

Intrinsic time is different from physical time, because it “ticks” when there is market activity.

Traditional finance analysis uses equally spaced prices for inputs (seconds, minutes, hours, or days), and it misses the real factors influencing the financial markets.

The idea of modeling prices using a different time clock can be traced back to the famous Benoit Mandelbrot in 1960’s, who proposed the use of transaction and volume-based clocks.

Central to the concept of intrinsic time are so-called “directional changes” and “overshoots”.

The “directional change” happens when the price does a trend reversal of a certain % and then the intrinsic time ticks.

The directional change is then followed by the price “overshoot” until the next trend reversal (i.e. directional change) happens.

A long overshoot means there is a lack of liquidity, like in a market crisis when prices move a lot.

Intrinsic time is a fascinating tool for market prediction, because we used it to discover patterns in financial markets!

Many have asked me how does intrinsic time actually work, so I write out below the algorithm that dissects the price into directional changes & overshoots, and defines intrinsic time!

Comment below if you would like to have the algorithm in Excel or Java!

Intrinsic time Algorithm:

Initialise variables (xext = x(t0), mode is arbitrarily set to up, Xi = x0, Ti = t0)

1: UPDATE latest Xi with x(t) 
2: UPDATE latest Ti with t 
3: IF mode is down THEN 
4: IF x(t) > xext THEN 
5: xext ← x(t) 
6: ELSE IF (xext − x(t))/xext ≥ λi THEN
7: xext ← x(t) 
8: mode ← up 
9: Xi ← x(t) 
10: Ti ← t 
11: END IF
12: ELSE IF mode is up THEN 
13: IF x(t) < xext THEN
14: xext ← x(t) 
15: ELSE IF (x(t) − xext)/xext ≥ λi THEN
16: xext ← x(t) 
17: mode ← down 
18: Xi ← x(t) 
19: Ti ← t 
20: END IF
21: END IF

Richard Olsen, the founder of Lykke - a ZERO fee crypto exchange, has created a tool called ATTMO, where you can predict the crypto markets with the “scaling law” patterns from Intrinsic Time.

Head over to ATTMO's website (link in comments) and check out the patterns!

#intrinsictime #attmo #lykke #quantitativetrading #crypto #hedgefund