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Anticipating markets: a
cocktail of chaos, phase transitions and statistical physics.
Preliminary
considerations.
Do you know what's the main disadvantage of
the
Technical Analysis? ...its methods are known by the majority!
Surely, you know stock
markets are a
Minority
Game: don't follow the main stream if you don't
want to make a loss.
In the
standard Minority Game there are only a few parameters: a (odd) number
N of "inductive agents" (the players),
whith two posible choices: "to buy" or "to sell" (or complementary
equivalents). Each player have to independently decide his
choice. A counting of all choices is done: the winners are players
which are up on the minority side. And so the game is repeated. A player does not know anything about the others but he must outguess
what everyone else is guessing.
However, the reality is rather different: as
well as inductive agents, there are "inteligent agents", which should be
so-called Maxwell's
demons from a thermodynamic point of view.
If you use the Technical Analysis, you'll become
into a inductive agent, that is to say, your behavior is predictable.
A Maxwell's demon who owns a number (big enough) of shares, can
simulate certain events and so "induce" a predictable behavior of
inductive agents. For instance, he can simulate that a support level is
perforated: he to sell a amount (big enough) of shares, quote to fall,
stop-losses to trigger, quote to drop. Then the demon to buy dropping
shares by the same money that he would have got in previous sales and so he
to restore quotes to previous level. This "cycle" is non-conservative,
so
as at final state demon would have got a amount of shares larger than at
initial state.
Perhaps some technical
analysis books were
wrote by some Maxwellian
demon.
The
Econophysical
Trend
Indicator ( ET I ).
As a theoretical model from statistical
mechanics, it was created
this indicator that anticipates a change of trend in financial markets.
ET I at a glance.
Click
here to get ETI-charts of S&P
500, Dow Jones stocks and others. |
