Catastrophe theory - page 2
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............. Assuming that the normal state of the system is flat (...................
Such mtrategies exist and have existed for a long time. And catastrophes are not exactly a prerequisite. The important element is the presence of force majeure, and of course the probability of its occurrence at least once every couple of years. In a nutshell, how it works - buying very cheap options or selling overvalued ones (which is sickeningly risky). Whoever is in the know will know what it's about.
what is "force majeure with a probability of at least once every couple of years"?
Taleb has a "rare event", but it is by no means "at least" once every couple of years.
Yep, yesterday I was happy yesterday evening on all the majors at 100pp for 5 min., it remains to be seen for whom this happiness is - if for a DC, I agree, but for those who have a medium-term....
As for the subject: I do not know how the catastrophe theory describes markets, but at the moment I tend to view the market as a crowd of pedestrians walking along the street, it remains to be seen if the actions of these pedestrians are coordinated and managed from above. After yesterday's movement in all the major instruments, I decline the theory that Forex is a system of market and limit orders for all instruments, because a couple of 5-minute candlesticks at 100pp in sync in different instruments just pushed the price down, I do not even want to think how much money we need to buy all sell orders for all major instruments and how we can arrange such a show that everything goes in sync.
Yep, had a happy evening yesterday on all the majors at around 100pp in 5 mins, still have to figure out who that happiness is for....
Yep, yesterday I was happy yesterday evening on all the majors at 100pp for 5 min., it remains to be seen for whom this happiness is - if for a DC, I agree, but for those who have a medium-term....
As for the subject: I do not know how the catastrophe theory describes markets, but at the moment I tend to view the market as a crowd of pedestrians walking along the street, it remains to be seen if the actions of these pedestrians are coordinated and managed from above. After yesterday's movement in all the Majors, I decline the theory that Forex is a system of market and limit orders for all instruments, because a couple of 5-minute candlesticks at 100 points in sync in different instruments just pushed the price down, I do not even want to think how much money we need to buy out all the sell orders for all the Majors and how we can arrange such a show to keep everything in sync
There is no 3 sigma in the market. The three sigma rule is valid if the forming process has constant variance, or volatility in market terms. In the market volatility is volatile - it is characterised by periods of clustering. I.e. falling out of 3 sigma does not mean a trend, it could just mean an increase in volatility
Let's start by defining a flat, for example this. On a chart, look for sections of length not less than N bars and not more than M bars, for which the angle of linear regression is not more than (let it be until degrees). Therefore transition between flat areas will be a trend.
Thus the problem reduces to identifying the moment of transition from one flat to another, like the catastrophe theory describes it if we believe Wikipedia.
Let's start with a definition of a flat, for example this. On a chart, look for sections of length not less than N bars and not more than M bars, for which the angle of linear regression is not more than (let it be until degrees). Therefore transition between flat areas will be a trend.
Thus, the task is reduced to identifying the moment of transition from one flat to another, like the catastrophe theory describes exactly that if we believe Wikipedia.
This is not what catastrophe theory describes. If you are trying to apply this theory in practice, you must have dependent and independent factors. Catastrophe theory explores the moments when a smooth change in the independent factors leads to an inadequately strong change in the dependent factors (catastrophe).