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An example.

I have bought a currency while the rate was 1.0. As soon as the conversion rate has increased to 2.0 I would like to sell the currency. Now, that would be an easy task to do. But we are not searching for "easy" tasks, are we?

What if there was a way to determine, whether the rate is still growing or not? For example, what if the conversion rate was still growing at +0.5 per minute, in that case - I would be able to sell the currency at rate 3.0 if only I have waited for 2 more minutes. Alternatively, I would be able to sell the currency at an even higher rate, if it was determined that the acceleration rate either stopped, or became negative.

Here is a visual representation of what I want to accomplish:

enter image description here

  • black line - good, but too early to sell
  • green line - sell now
  • red line - better sell it now, before rate decreased

Is there an algorithm to accomplish this task?

At this point - it is not clear to me:

  1. What would be the best time range to take into acceleration rate calculations. Should I consider the rate change during the last 10 minutes, 5 minutes or 20 seconds?

  2. How do I determine that the "growth" (acceleration rate) has stopped or is close to being stopped?

  3. Do I only need to know only the conversion rate, or also number of trades (buys/sells) at a given time frame?

Any advices are appreciated.

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  • $\begingroup$ Is what you want essentially numerical differentiation? Your specific questions appear to be mostly dependent on specific economic/risk analysis knowledge and may not be a good fit for this site. $\endgroup$ – Discrete lizard Jan 2 '18 at 18:46
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You are seeking to predict future values of the time series based on past values. There's lots in the area of time series analysis and prediction; I suggest reading about those topics. The right approach will depend on domain knowledge and how currency rates tend to change and what statistical model is appropriate in your setting.

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