|  APR 1989

Letters To S&C

LETTERS TO S&C Fast Fourier Transforms Editor, I am a current user of the technical analysis software CompuTrac and have been recently introduced (two months) to your theory on FFT (Fast Fourier Transform). However, I am puzzled by the fact that Fourier transforms can be used in technical analysis. As an engineer, I have used Fourier transforms but from an engineering perspective. I would appreciate it if you could send me more information on FFT as I would like to seriously study this new form of analysis. K. GIN Singapore As In engineering, Fourier Analysis is used to locate possible poles and zeros within historical data. The common procedure is to pick a low spot, a zero, then exit to large highs, the poles of large magnitude cycles, and use the low as a cut-off frequency. The cut-off frequency is then used to tune or optimize a filter such as a moving average. Assuming the future will act a little like the past, we can quickly produce optimum trade timing tools such as moving averages or crossovers. The ""Fast Fourier Transform with Data Preprocessing"" published in our Volume One properly preprocesses your historical data and gives a clear picture of any cycles. This routine is included in the CompuTrac system. ... —Ed.

by Technical Analysis, Inc.