Next-Day Probability (precise probability of a next day up or down price move).

Market Power (the ability of the market to raise or lower the price of an asset).

Market Resistance (increasing resistance reduces Market Power).

Market Noise (increasing noise reduces the efficiency of Market Power).

Precisions Alpha’s Measurements are interrelated and, when used together, expose extraordinary insights into alpha.

Our Approach

Precision Alpha uses the measurements to calculate exact, closed-form algebraic expressions for market probabilities, market energy, market power, market resistance, and market noise. The Relative Strength Index is the closest dimensionally to market energy.

Our measurements are exact.

Precision Alpha data uses six months of closing prices to return exact machine-learned results.

No sampling.

• Precision Alpha provides indicators or significant price movement with a six-week future horizon.
  
• Precision Alpha uses non-equilibrium signal analysis on closing prices to expose what market participants are currently unable to see: Exact, unbiased probabilities that show reversion-to-mean and increasing momentum
• Precision Alpha identifies structural breaks in financial time-series to indicate a confluence of factors that offer a favorable risk-adjusted return.

The Sharpe ratio is defined using statistical expressions, namely, the average return and the standard deviation. It is clear, however, that financial markets are not in statistical equilibrium, and this measure is misleading in most financial markets. The non-equilibrium generalization of the Sharpe ratio can be shown to be always greater than the equilibrium case. Therefore we call the non-equilibrium expression a “Sharper ratio”, and is defined as the ratio of the expected PL minus the risk-free return, divided by the expected PL minus the average return.

Example

Used Precision Alpha to see and trade a NASDAQ correction before it occurred.

QQQ March 2018 – Bull Dominant. 7.6% Drop

Prediction:
Market Power supporting Bull Dominant QQQ declined by more than 50%

• From 451 to 198 on March 12.
  Yet the Closing Price for QQQ was still near its recent high.
• 173 3/12 vs 171 3/15
  With Marketing Power fading and prices still high,
  clearly, QQQ was poised to decline.

Action:
Bought 2-week QQQ puts at 171 March 15.
QQQ moved rapidly to 158 by March 23 as the NASDAQ sold off.

Market Power

‘Ability of the financial market to raise/lower or maintain the price of an asset above/below what would prevail at equilibrium.’

Market Resistance

‘Resistance to a dominant movement in price of an asset. Increasing resistance reduces market power.’

Market Noise

‘Noise reduces the efficiency of market power. Market power is dissipated.’

Probabilities

‘Next day probability that the price of an asset will go up (bull), or go down (bear) the next day.’