Modelling of Currency Exchange Rates Using a Binary-Wave Representation

摘要

Exchange rate of a currency pair can be visualized in a binary representation. Binarization algorithm transforms the course trajectory represented by tick data into an appropriate binary string. This kind of representation allows for a far more precise analysis and can be applied in HFT systems. In the following article a state model for exchange rate in binary representation with use of wave relations is proposed. In the model, states corresponding to particular price change patterns and wave types were defined. The wave detection process uses respective algorithms of wave detection in binary representation. In the article, research was performed for EUR/SEK currency pair with main focus on the possible application of abovementioned model in creating a HFT system with a positive rate of return.