QuanTAlib/lib/statistics/median/Median.md

MEDIAN: Rolling Median

"The average is easily influenced by outliers; the median stands its ground."

The Rolling Median is a robust statistic that represents the middle value of a dataset within a moving window. Unlike the Simple Moving Average (SMA), which can be skewed by extreme values, the Median provides a more stable measure of central tendency, making it particularly useful for filtering noise in volatile markets.

Historical Context

The concept of the median dates back to Edward Wright in 1599, but its application in time-series analysis became prominent with the rise of robust statistics in the 20th century. In technical analysis, it is often used as a replacement for moving averages to identify trends without the lag induced by averaging large deviations.

Architecture & Physics

The Median calculation requires maintaining a sorted view of the data window.

• Inertia: High. A single new data point rarely shifts the median significantly unless it crosses the middle threshold.
• Stability: Extremely robust against outliers. A price spike of 1000% has the same effect on the median as a spike of 1%.
• Complexity: O(N \log N) per update due to sorting, where N is the period. For typical trading periods (N < 200), this is negligible on modern CPUs.

Mathematical Foundation

For a window of N values X = \{x_1, x_2, ..., x_N\} sorted in ascending order:

1. Odd Period

If N is odd, the median is the middle element:

\text{Median} = X_{(N+1)/2}

2. Even Period

If N is even, the median is the average of the two middle elements:

\text{Median} = \frac{X_{N/2} + X_{(N/2)+1}}{2}

Performance Profile

Metric	Score	Notes
Throughput	High	O(N \log N) is fast for small N.
Allocations	0	Uses pre-allocated buffers and in-place sorting.
Complexity	O(N \log N)	Sorting dominates the cost.
Accuracy	10/10	Exact calculation.
Timeliness	Medium	Lags similar to SMA but handles steps differently.
Smoothness	High	Filters out noise effectively.

Validation

Library	Status	Notes
Math.NET	✅	Matches statistical definition.
Excel	✅	Matches MEDIAN() function.
Python	✅	Matches numpy.median.

Common Pitfalls

• Quantization: The median moves in discrete steps (jumps from one value to another) rather than smoothly like an average.
• Flatlining: In periods of low volatility, the median can remain constant for many bars, which may be interpreted as a lack of trend.