The market is a controlled dynamic system. - page 343
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1) No, the players are not individual traders, but some homogeneous groups of traders into which their totality is divided. The same is true of institutional market participants - they are divided into one or more homogeneous groups, each of which is perceived as a separate player.
2) The goal is of course much more modest than the effect on price. 3) I would like to understand, by simple examples, the possible mechanism leading to its non-stationarity.
4) The system as a whole may be Markovian, but the price series itself may well be non-Markovian.
1) You personally, sitting at the monitor, perceive a specific instrument chart as a separate trader and not as a member of some group. For you personally at this time all groups, homogeneous or heterogeneous, in their totality represent the market element.
2) It's not about you as a trader influencing the price. On the contrary, it is about ensuring that your actions as a trader will not result in a reaction from the market element.
3) It is time to understand that stationarity is not the norm but the exception to the rule. In the vast immense ocean of non-stationarity, there are very rare and very small islands called (pseudo)stationarity.
4) What kind of system are you talking about? If a system must describe a non-Markovian price series, then it cannot be a Markovian system.
4) What kind of system are you talking about? If a system is to describe a non-Markovian price series, then that system cannot be Markovian.
Meaning something like hidden Markov models- variables are added and the complicated system is treated as Markovian. I don't believe in the magic ability of the past to affect the future directly - only through the present, information about which is not available to us (but available to market makers, for example).
1) You personally, sitting at the monitor, perceive a particular instrument chart as an individual trader, not as a member of some group. For you personally at this time, all groups, homogeneous or heterogeneous, in their totality represent the market element.
If we do not see them, it does not mean they do not exist. We can see them indirectly - by applying our models to prices. This is a perfectly normal method of scientific cognition (no one has seen the electron either).
2) This is not about you as a trader influencing the price. On the contrary, it is about the fact that your actions as a trader will not result in a reaction from the market elements.
There will be a reaction, but not to you personally, but to the aggregate of traders acting in a manner similar to yours. Do not assume that the actions of traders are very unique.
3) It is time to understand that stationarity is not the norm but the exception to the rule. In the vast immense ocean of non-stationarity, there are very rare and very small islands called (pseudo)stationarity.
So we are looking for these islands as we can. Sometimes they turn out to be what at first glance appeared to be non-stationarity, sometimes it's the other way round.
It is something like hidden Markov models- variables are added and the complicated system is treated as Markovian. I don't believe in the magic ability of the past to affect the future directly - only through the present, information about which is unavailable to us (but available to market makers, for example).
Feedback systems -- and no magic, and faith plays no role here.
Transport lagging is an example of this impact.
If we don't see them, it doesn't mean they don't exist. We can see them indirectly - by applying our models to prices. This is a perfectly normal method of scientific cognition (no one has seen the electron either).
There will be a reaction, but not to you personally, but to a set of traders acting in a similar way to yours. You should not assume that the actions of traders are very unique.
So we are looking for these islands as we can. Sometimes they turn out to be what at first glance looks unsteady sometimes it's the other way round.
You and I see the problem differently and solve it differently.
I wish you every success.
Feedback systems -- and no magic, and faith plays no role here.
Transport lag is an example of this kind of influence.
It's just a simplification of the process model, although it's very useful.
You and I see the problem differently and solve it differently.
I wish you success.
Likewise. Good luck to all of us.
This is just a slight simplification of the process model, albeit a very useful one.
Likewise. Good luck to us all.
Tr.lag is not as a simplification of the process model, but as an element of the process model.
Tr.lag is not as a simplification of the process model, but as an element of the process model.
It is the result of some complex process, which is not usually studied in detail, and is therefore treated as a given from the outset.