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Contrary to traditional finance (TradFi), intrinsic time focuses on the events of trend reversals or price overshoots in its economic prediction models rather than calendar time. This is why intrinsic time has the potential to revolutionize the way investors set up trading strategies and predict markets. Lykke’s crypto prediction tool ATTMO taps on this concept.
We’re all familiar with calendar time ticking on every second, and slowly but surely turning into minutes, hours and days. TradFi uses these rigid and static time periods in its prediction models.
In the 1960’s, the French American mathematician Benoit Mandelbrot revolutionized science by explaining that nature is the opposite of a smooth process and is highly chaotic.
He showed that simple mathematical rules could recreate chaos. Mandelbrot postulated that physical time should be replaced by a more dynamic notion of time and trading volume should set the beat of time. Lykke was an early proponent of Mandelbrot’s methodologies. Over the years, our team developed a new framework for measuring time, so called intrinsic time.
Intrinsic times occur when directional changes are detected – when price movements reach a certain percentage or threshold. This means that a trend reversal is confirmed, and an overshoot event happens. Trading opportunities thus abound!
When markets have low volatility and volume, as over a typical weekend, intrinsic time automatically accelerates the passage of this time. Intrinsic time will instead “tick” synchronized with the beat of the events of the data series when the price curve of an asset experiences a trend reversal – the price movement turns in the opposite direction. Examples abound, such as when financial markets change direction triggered by market-moving events like the release of macroeconomic data or the dismissal of a CEO.
Intrinsic time is thus good at discovering patterns in financial markets, and at focusing on what is relevant for achieving a good financial performance. It makes intrinsic times a more reliable prediction tool as it does not miss out on trading opportunities.
Lykke has developed a tool that makes cryptocurrency predictions based on artificial intelligence, ATTMO. This innovative trading tool bases itself on the patterns of intrinsic time and uses intuitive weather icons to illustrate the future trading trends. By using ATTMO for their trading strategy, investors can navigate the crypto markets with a greater precision and confidence. Try it out here.