Cycles/test/demonstrate_signal_difference.py

#!/usr/bin/env python3
"""
Demonstrate Signal Generation Difference
========================================

This script creates a clear visual demonstration of why the original strategy
generates so many more exit signals than the incremental strategy.
"""

import pandas as pd
import matplotlib.pyplot as plt
import numpy as np

def demonstrate_signal_difference():
    """Create a visual demonstration of the signal generation difference."""
    
    print("🎯 DEMONSTRATING THE SIGNAL GENERATION DIFFERENCE")
    print("=" * 80)
    
    # Create a simple example scenario
    print("\n📊 EXAMPLE SCENARIO:")
    print("Meta-trend sequence: [0, -1, -1, -1, -1, 0, 1, 1, 0, -1, -1]")
    print("Time periods:        [T1, T2, T3, T4, T5, T6, T7, T8, T9, T10, T11]")
    
    meta_trends = [0, -1, -1, -1, -1, 0, 1, 1, 0, -1, -1]
    time_periods = [f"T{i+1}" for i in range(len(meta_trends))]
    
    print("\n🔍 ORIGINAL STRATEGY BEHAVIOR:")
    print("-" * 50)
    print("Checks exit condition: prev_trend != 1 AND curr_trend == -1")
    print("Evaluates at EVERY time period:")
    
    original_exits = []
    for i in range(1, len(meta_trends)):
        prev_trend = meta_trends[i-1]
        curr_trend = meta_trends[i]
        
        # Original strategy exit condition
        if prev_trend != 1 and curr_trend == -1:
            original_exits.append(time_periods[i])
            print(f"  {time_periods[i]}: {prev_trend} → {curr_trend} = EXIT SIGNAL ✅")
        else:
            print(f"  {time_periods[i]}: {prev_trend} → {curr_trend} = no signal")
    
    print(f"\n📈 Original strategy generates {len(original_exits)} exit signals: {original_exits}")
    
    print("\n🔍 INCREMENTAL STRATEGY BEHAVIOR:")
    print("-" * 50)
    print("Checks exit condition: prev_trend != -1 AND curr_trend == -1")
    print("Only signals on STATE CHANGES:")
    
    incremental_exits = []
    last_signal_state = None
    
    for i in range(1, len(meta_trends)):
        prev_trend = meta_trends[i-1]
        curr_trend = meta_trends[i]
        
        # Incremental strategy exit condition
        if prev_trend != -1 and curr_trend == -1:
            # Only signal if we haven't already signaled this state change
            if last_signal_state != 'exit':
                incremental_exits.append(time_periods[i])
                last_signal_state = 'exit'
                print(f"  {time_periods[i]}: {prev_trend} → {curr_trend} = EXIT SIGNAL ✅ (state change)")
            else:
                print(f"  {time_periods[i]}: {prev_trend} → {curr_trend} = no signal (already signaled)")
        else:
            if curr_trend != -1:
                last_signal_state = None  # Reset when not in exit state
            print(f"  {time_periods[i]}: {prev_trend} → {curr_trend} = no signal")
    
    print(f"\n📈 Incremental strategy generates {len(incremental_exits)} exit signals: {incremental_exits}")
    
    print("\n🎯 KEY INSIGHT:")
    print("-" * 50)
    print(f"Original: {len(original_exits)} exit signals")
    print(f"Incremental: {len(incremental_exits)} exit signals")
    print(f"Difference: {len(original_exits) - len(incremental_exits)} more signals from original")
    print("\nThe original strategy generates exit signals at T2 AND T10")
    print("The incremental strategy only generates exit signals at T2 and T10")
    print("But wait... let me check the actual conditions...")
    
    # Let me re-examine the actual conditions
    print("\n🔍 RE-EXAMINING ACTUAL CONDITIONS:")
    print("-" * 50)
    
    print("ORIGINAL: prev_trend != 1 AND curr_trend == -1")
    print("INCREMENTAL: prev_trend != -1 AND curr_trend == -1")
    print("\nThese are DIFFERENT conditions!")
    
    print("\n📊 ORIGINAL STRATEGY DETAILED:")
    original_exits_detailed = []
    for i in range(1, len(meta_trends)):
        prev_trend = meta_trends[i-1]
        curr_trend = meta_trends[i]
        
        if prev_trend != 1 and curr_trend == -1:
            original_exits_detailed.append(time_periods[i])
            print(f"  {time_periods[i]}: prev({prev_trend}) != 1 AND curr({curr_trend}) == -1 → TRUE ✅")
    
    print("\n📊 INCREMENTAL STRATEGY DETAILED:")
    incremental_exits_detailed = []
    for i in range(1, len(meta_trends)):
        prev_trend = meta_trends[i-1]
        curr_trend = meta_trends[i]
        
        if prev_trend != -1 and curr_trend == -1:
            incremental_exits_detailed.append(time_periods[i])
            print(f"  {time_periods[i]}: prev({prev_trend}) != -1 AND curr({curr_trend}) == -1 → TRUE ✅")
    
    print(f"\n🎯 CORRECTED ANALYSIS:")
    print("-" * 50)
    print(f"Original exits: {original_exits_detailed}")
    print(f"Incremental exits: {incremental_exits_detailed}")
    print("\nBoth should generate the same exit signals!")
    print("The difference must be elsewhere...")
    
    return True

def analyze_real_difference():
    """Analyze the real difference based on our test results."""
    
    print("\n\n🔍 ANALYZING THE REAL DIFFERENCE")
    print("=" * 80)
    
    print("From our test results:")
    print("• Original: 37 exit signals in 3 days")
    print("• Incremental: 5 exit signals in 3 days")
    print("• Both had 36 meta-trend changes")
    
    print("\n🤔 THE MYSTERY:")
    print("If both strategies have the same exit conditions,")
    print("why does the original generate 7x more exit signals?")
    
    print("\n💡 THE ANSWER:")
    print("Looking at the original exit signals:")
    print("  1. 2025-01-01 00:15:00")
    print("  2. 2025-01-01 08:15:00") 
    print("  3. 2025-01-01 08:30:00  ← CONSECUTIVE!")
    print("  4. 2025-01-01 08:45:00  ← CONSECUTIVE!")
    print("  5. 2025-01-01 09:00:00  ← CONSECUTIVE!")
    
    print("\nThe original strategy generates exit signals at")
    print("CONSECUTIVE time periods when meta-trend stays at -1!")
    
    print("\n🎯 ROOT CAUSE IDENTIFIED:")
    print("-" * 50)
    print("ORIGINAL STRATEGY:")
    print("• Checks: prev_trend != 1 AND curr_trend == -1")
    print("• When meta-trend is -1 for multiple periods:")
    print("  - T1: 0 → -1 (prev != 1 ✅, curr == -1 ✅) → EXIT")
    print("  - T2: -1 → -1 (prev != 1 ✅, curr == -1 ✅) → EXIT")
    print("  - T3: -1 → -1 (prev != 1 ✅, curr == -1 ✅) → EXIT")
    print("• Generates exit signal at EVERY bar where curr_trend == -1")
    
    print("\nINCREMENTAL STRATEGY:")
    print("• Checks: prev_trend != -1 AND curr_trend == -1")
    print("• When meta-trend is -1 for multiple periods:")
    print("  - T1: 0 → -1 (prev != -1 ✅, curr == -1 ✅) → EXIT")
    print("  - T2: -1 → -1 (prev != -1 ❌, curr == -1 ✅) → NO EXIT")
    print("  - T3: -1 → -1 (prev != -1 ❌, curr == -1 ✅) → NO EXIT")
    print("• Only generates exit signal on TRANSITION to -1")
    
    print("\n🏆 FINAL ANSWER:")
    print("=" * 80)
    print("The original strategy has a LOGICAL ERROR!")
    print("It should check 'prev_trend != -1' like the incremental strategy.")
    print("The current condition 'prev_trend != 1' means it exits")
    print("whenever curr_trend == -1, regardless of previous state.")
    print("This causes it to generate exit signals at every bar")
    print("when the meta-trend is in a downward state (-1).")

def main():
    """Main demonstration function."""
    demonstrate_signal_difference()
    analyze_real_difference()
    return True

if __name__ == "__main__":
    success = main()
    exit(0 if success else 1)