To accomplish this, we show that a Markov model can find regularities in certain local regions of the data and can be used to predict the direction of the next tick.
Predictability seems to decrease in more recent years.
With transaction costs, the model is unlikely to be profitable. The analysis and prediction of time series has received much interest in recent years. High frequency time series analysis and prediction using markov models. High frequency time series analysis and prediction using markov models. Weigend, Huberman et al.