The market is a controlled dynamic system. - page 287

 
alsu:

The connection is as follows.

The market is a system, i.e. "a set of elements for which the functional dependence between time and position in space of each element of the system is specified". In this case the elements are all that we can imagine as market agents, 'functional dependence' are laws of supply and demand, and 'space' is of course not space in the usual sense, but the so-called phase space, that is the set of all possible sets of characteristics of all processes occurring in the market, as a function of time. In mathematics, "set" is called by the clever word "vector". Basically, everything that we can describe with a set of characteristics, no matter how long, is a dynamic system, so all those laws that are proved and derived for dynamic systems are applicable to it.

It is clear that the actual quantitative characteristics of the market are quite numerous, for example, for each trader it is possible to introduce numerical indicators such as the amount of available funds, risk appetite, speed of reaction to news, etc. So how do we study such systems? Here we are helped by the consideration that the behavior of agents is actually not as independent and chaotic as it seems at first glance. Indeed, traders to a greater or lesser extent read the same news, watch on TV forecasts of the same analysts, have very similar psychological mechanisms (information-greed-fear interaction) affecting the execution of market deals. As a result, stochastic degrees of freedom appear in the complex system instead of purely mechanical ones corresponding to each trader's individual characteristics.

It is like the way we study gases, measuring their pressure but not the force of each molecule hitting the wall of the vessel, the temperature but not the energy of each molecule; and the macroscopic characteristics of the gas are in a very precise physical relation to each other. This is also the case in the market: similar characteristics of microscopic interactions form, at the macro level, quite sane laws of motion with not so many effective stochastic degrees of freedom.

And so from here we have this: There would be! The market -- a controlled dynamical system!
 
strategist:
And so from here we have this: Would be! The market -- a controlled dynamic system!

So it is a matter of science. If one manages to find a model of the system that adequately describes it, then it is recognised at this stage that this is the law of its operation.

Or have you decided that no one will ever find such a law?

 
But it is not even that dramatic. The statement "the market is a dynamic system" is, in principle, unquestionable, because the system itself and its state are there. And "manageable" follows from the fact that the market is not closed inwards, but is open to external influences - incoming information.
 
alsu:

So it is a matter of science. If one manages to find a model of a system that adequately describes it, then it is recognised at this stage that this is the law of its operation.

Or have you decided that no one will ever find such a law?



I am in search of such a law!
 
alsu:
But it is not even that dramatic. The statement "the market is a dynamic system" is, in principle, unquestionable, because the system itself and its state are there. And "manageable" follows from the fact that the market is not closed inwards, but is open to external influences - incoming information.
Let's define the root of control. To the instrument EUR/USD.

P.S. I met people who are convinced that the price is reproduced by the MT4 programme.
 
strategist:

I am looking for such a law!

Good luck, but don't forget that there are things to consider, such as this, that are problematic:

Fundamental analysis is a key tool for understanding financial market processes. It is a method of forecasting price changes based on analysis of the economic situation, political events and crisis phenomena. In other words, it is an analysis of the factors that influence price formation here and now.

Fundamental analysis is based on four main factors:

  • political (these are elections, speeches by heads of state, crisis situations in the country);
  • economic (macroeconomic statistics, statements of influential people in the financial world)
  • Force majeure (natural disasters, man-caused accidents, terrorist attacks) - those factors that cannot be predicted in advance;
  • Psychological, because the financial market is largely a reflection of human emotions. And the most important ones in terms of our topic are fear, greed, expectations and rumors.

Different news have different effects on the market. Random, unexpected news have a strong but short-lived impact, while the expected news have a more lasting effect on the market. If market expectations are met, price dynamics will not change much. The market underestimated a particular factor - the current momentum will continue, accelerating at the moment of event occurrence. Expectations turned out to be wrong - you can expect the strong change of the rate in the direction opposite to the previous one.

Fundamental factors have different life cycle. Unexpected news have a short life cycle - no more than 24 hours. All force majeure fundamental factors have a momentary sharp influence on asset quotations, but cannot change the trend. Factors related to the general state of economy, national and world, "live" much longer - from several weeks to several years. Such factors determine the general direction of price movements.

Economic factors are probably the main group in fundamental analysis, and they are numerous. They include economic indicators, trade negotiations (they influence mainly stock and commodity markets, but not currency markets), meetings of Central Bank, monetary policy, speeches of influential people, contingent risks, speculations, and interventions.

A particular exchange rate is influenced by factors that reflect the state of a given country's economy. These are indicators of economic growth, such as GDP, trade balance, inflation and inflation expectations, the degree of development of various sectors of the market, the interest rate and much more. It is important for a trader to know them and be able to interpret them correctly.

In addition, keep in mind that:

The volume of foreign exchange transactions is currently about $4 trillion a day[3].

3 - ↑ Triennial Central Bank Survey.Foreign exchange and derivatives market activity in April 2010. Bank for International Settlements.

 

avtomat:

Что ж до тебя никак не доходит смысл термина Управляемая динамическая система в применении к рынку...

Well, maybe you'll see what I mean:

I'm not against using the term Managed Dynamic System as applied to the market. But I think you have a profound misunderstanding of the term 'controlled'. In first year students are taught differential equations with governing forces. By controlling forces they mean external influences on the system. In this strictly scientific understanding of the terms, of course the market is controlled because its participants are guided not only by price history (internal parameter) but also by new information from outside - news, ecological reports, etc.

As you understand it, "controlled" means "manipulated", which is not the same thing. You even showed a picture of some uncle manipulating the direction of the market with a carrot. And now you set your mind to find out where the uncle has directed the carrot to make the donkey-market move there. You are a supporter of the conspiracy theory - that bankers and masons manipulate the market to get rich at the expense of its participants. Has it ever occurred to you that the market is run purely by random external forces, like war, or the ecological report? Look at market surges: they all happen at the moment of news release. Or do you think that these news and wars are also manipulated by Freemasons?

While you set yourself the super task of exposing the Freemasons, other traders simply wait for an external jolt (its direction cannot be predicted in most cases) and trade in the direction of the reaction, making money.

 

alsu:

As a result, in a complex system, instead of purely mechanistic degrees of freedom corresponding to each characteristic of each trader individually, there are stochastic ones.

This is too serious an assumption.

This is similar to the way we study gases, measuring their pressure but not the force of each molecule hitting the wall of a vessel, the temperature but not the energy of each molecule; with the macroscopic characteristics of the gas being in a very precise physical relation to each other.

Except that microscopic influences are not stochastic. And every trader is stochastic. even a bot.
 
yosuf:


The volume of foreign exchange transactions is currently around $4 trillion a day[3].

3 - ↑ Triennial Central Bank Survey.Foreign exchange and derivatives market activity in April 2010. Bank for International Settlements.



I think if you quote directly from the books and follow it precisely, the mind goes into a kind of ring of thinking where the algorithm of development is lost. (Why think if you have already thought). What is needed are facts and the consequence of the facts, i.e. the result.

Fact

Thebanking crisis in Cyprus can be considered as one of the worst in Europe .

The consequence... The euro is not going to fall in the face of the crisis.

________________________________________________________________________________________________________________________

Fact: Huge US debt.

Consequence... The dollar is not going to turn into a piece of paper.

Conclusion Fundamental analysis is not giving the expected result. What from this we can assume that the market is controlled artificially and all this fundamental news is just a farce and has no effect on the market.

 
strategist:


The conclusion is that fundamental analysis does not give the expected result. What from this we can assume that the market is artificially controlled and that all this fundamental news is just a farce and has no effect on the market.

examples are not correct....
i'll tell you more...even you can manipulate the market...
all you need to do is find the right amount of money ))))