Posted by Vic on Sep 2, 2015

Algorithms, the weather and Binary Options trading
We all love to forecast things especially the weather! Our predictions have got better over the last few decades and we can now predict the weather up to a year ahead. Wow, that sounds great! Nice to be able to plan your much needed holiday so far in advance. Because we now have high powered computers we can use much more sophisticated algorithms to determine future weather patterns. One company has even developed an algorithm that can – they say – predict what kind of music people want to hear! What exactly is an algorithm? An algorithm is a self-contained step-by-step set of operations to be performed. They can be used to perform calculations, data processing and automated reasoning. A bit of history Let’s go back to 1901 when a man by the name of Cleveland Abbe said that in order to correctly predict the weather you needed to apply both hydrodynamics and thermodynamics to the atmosphere. In 1904, Vilhelm Bierknes made a two-step plan for predicting future weather patterns including a ‘diagnostic’ step of observing atmospheric conditions and a ‘prognostic’ step using the laws of motion to compute how the system evolves over time. He got as far as working out most of the necessary equations but no further. And then in 1922 Lewis Fry Richardson described a detailed method for predicting the weather. But it took him over 6 weeks to attempt to forecast a mere 6 hours ahead doing all the calculations by hand! Despite his confidence in his system, Richardson failed to make useful predictions. And then in the mid-1930’s, John Von Neumann realized that weather prediction was ideally suited to computers since it uses a large quantity of calculations from initial measurements using clearly defined algorithms. In 1950, a meteorologist called Jule Charney and his team worked out an original algorithm on the only computer available at the time, the ENIAC. It took a full 24 hours to predict 24 hours of weather! Interestingly enough, the very first computers were used to work on weather forecast along the same lines as Richardson’s original model. Things have steadily improved since then and the main advances have been through faster computing power which allows for quicker testing and comparing of different algorithms which can then be adjusted to improve their speed and efficiency. Of course the theoretical models have improved as well. Early algorithms of Persistence and Climatology Ever since we started measuring and recording the weather, the science of weather forecasting has used two simple algorithms, that of persistence and climatology. Persistence This assumes that tomorrow’s weather will be the same as today’s. Traditionally this was more accurate for short periods lasting a few hours to 1-2 days. Climatology This assumes that the weather on a given day of the year will, on average, be the same as the weather was on the same day a year ago and for several years before that. Traditionally this was more accurate for medium to long term periods of say a week or so. Both algorithms are limited as they rely on existing records alone. Also, neither algorithm has helped predict rare and extreme weather conditions such as storms, blizzards, cyclones and hurricanes. The challenge ahead If you want to build on the basic algorithms of persistence and climatology – which rely on existing records – you have to deal with a much larger quantity of data for which you need not only more sophisticated prediction algorithms that model the evolution of the atmospheric system but also incredible computational power. The butterfly Effect You would think that with all this added information you could compute the weather accurately...

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