Noisy Channel


Claude Shannon

“The fundamental problem of communication is that of reproducing at one point either exactly or approximately a message selected at another point.” 

Imprinting  one Wave Form on another (MODULATION ANALOGY).

Modulation is the shaping of a signal to convey information, in most cases the shaping of radio waves to represent a digital message, or the shaping of radio waves to represent the information contained in sound and video. Another way of thinking about modulation is as a method of conveying a wave within a wave or a  message wave inside the carrier wave.

A modern day message in a bottle.

Carrier waves can be modified to “mimic” the real message by varying the carrier waves amplitude, phase or frequency. Two of the most basic modulation schemes are amplitude modulation (AM), and frequency modulation (FM). Once a transmission has been received the information is then extracted in a process called demodulation.



If Price Patterns are Carrier Waves what is the Signal?

To begin to answer the question above lets quickly review how to start the digital processing of candle sticks…

  • In order to apply QDT on the smallest possible we need two candle sticks as a minimum hence (base pair).
  • Each base pair consist of a (trailing and leading) candle stick.
  • A single candlestick has 4 nodes to compare (OHLC).
  • All node comparisons or configurations are refered to as quantum Dow states.
  • States are expressed as bits.

The central idea of Quantum Dow Theory is that price fluctuations can be expressed as a series of symbols or “trinary” numbers for signal processing. Below is the picture of a spreadsheet showing columns of bits that represent the 13 states of a candle stick base pair’s configuration.  The next image shows various Random Walks on Price Nodes based on the columns.



Both Dow and Shannon realized that the problem with transmitting signals is making sure that the receiver gets the intended message. Dow was countering noise and confidence, while Shannon was countering noise and data corruption.  The solution that both arrived at was to have the sender dedicate more resources to transmitting extra bits. Each solution relied on creating signal  redundancy.

Noisy Channel

Dow Theory relies on sending two extra indexes that have to confirm the signal of (Better Worse Same) at the same time. Thus if less than the three indexes are sending the same message then there is some degree of noise in the transmission. Shannon also determined that if the sender sends enough extra bits he could overcome the data loss due to noise. The cost is a slower transmission the benefit is guaranteeing that the message gets through.

QDT can be seen as a demodulation process where multiple node comparisons constructed by valid Dow interpretations produces a stream of bits (1,0,-1) representing (Better, Worse, Same). Next “random walks” of the various bits streams are used to construct multiple analog wave forms of (BWS) over time, and all of these must confirm price to create an optimal QDT signal.

Thus the random walks are an analog representation of the (Better Worse, Same) bit streams derived from candle stick base pairs as interpreted by Classic Dow.  The benefit is that the random walks will sometimes be coherent moving tightly together and sometimes completely incoherent. It is this variation in signal that provides a entirely new way to process price patterns.

NOISE; Not All trends are created Equally

the macro state = trend
micro state = all possible quantum dow configurations
all micro must confirm each other
micro must confirm macro

Bit Pulses Analogy for stochastics
stochastics puts the RWOPN in the same phase space wich makes noise analysis much easier
stochastics becomes a trend confirmation tool instead of an over bought/sold indicator


noise 2







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