A bounded operator approach to technical indicators without lag

TL;DR

This paper introduces a linear algebra framework to define technical trading indicators as bounded operators, enabling the creation of no-lag versions and comparing their effectiveness in algorithmic trading systems.

Contribution

It presents a novel operator-based approach to technical indicators, simplifying the derivation of no-lag versions and providing a basis for systematic comparison.

Findings

No-lag indicators improve trading signal timeliness

Operator approach simplifies indicator computation

Comparison shows advantages of no-lag systems

Abstract

In the framework of technical analysis for algorithmic trading we use a linear algebra approach in order to define classical technical indicators as bounded operators of the space $l^\infty(\mathbb{N})$. This more abstract view enables us to define in a very simple way the no-lag versions of these tools. Then we apply our results to a basic trading system in order to compare the classical Elder's impulse system with its no-lag version and the so-called Nyquist-Elder's impulse system.