A variant of the proof of the first axiom of Dow - page 9
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No one, but without such an assertion, one cannot argue that price contains information about supply and demand. One thing follows from the other:)
But the point is that Price contains information only about the Supply and Demand balance, not about Supply and Demand as such:).
And hence, it follows that the interpretation of the Axiom, which was retold TC, or misinterpreted and need to look for the original, and translate it.
Or it is not correctly formulated by the Author, which I doubt...
But in this situation, proving something that is either not correctly understood or not correctly formulated....
just doesn't make sense :)
The so-called "Dow axiom" does not say or refer to the fact that the price contains information about a specific level of supply and demand and can be derived analytically from the price.
It says that the price contains all information available to the market - fundamentals, politics, rumours, gossip etc.
With this information traders form supply and demand which determine the price
And it's true that an interesting concept has emerged - the cost of stock. Is it the cost of paper and ink?
The Dow Axiom neither says nor has it ever been said that prices contain information about the specific level of supply and demand and can be analytically obtained from prices.
It says that the price contains all information available to the market - fundamentals, politics, rumours, gossip etc.
With this information traders form supply and demand which determine the price
You are right again :)
With one small correction:
The Price, as such, does not and cannot contain information about fundamentals, politics, rumours, gossip, etc. .
(for these cannot be derived from the Price by any means known to us:)...
but... the Price contains information about the RELATIONSHIP of foundation, politics, rumour, gossip, etc...)
I believe that with this conclusion of our co-creation, you and I cannot disagree:)
The market price is the end result of the transaction between the buyer and the seller.
What was the buyer's demand and the seller's supply at the time of this transaction cannot be known from the price. This supporting information is available in the tumbler. What is the dispute about?
You're absolutely right again :)
With one small correction:
The Price, as such, does not and cannot contain information about foundations, politics, rumours, gossip, etc...
(for these cannot be derived from the Price by any means known to us:)...
but... the Price contains information about the RELATIONSHIP of foundation, politics, rumour, gossip, etc...)
I suppose with this conclusion of our work together, you and I couldn't agree more:))
)))) you've got it!
The price does indeed contain all the information available to the market. What do you mean "you can't get"?
If the price of a currency rises before the Central Bank rate is announced, then you can analytically identify what market participants are calculating based on rumours, fundamentals and policy for a rate hike.
What does it even mean to "get information"? This is not chemistry, where if there is a chemical element in solution, it can be obtained from the solution.
Or alternatively, if a market participant did not know immediately after the Brexit referendum result was made public, but saw the pound quotes, he could easily predict analytically from the quotes the result of the referendum.
Obtaining information from the price
1. The Price, as such, does not and cannot contain information about foundations, politics, rumours, gossip, etc. .
(for these cannot be derived from the Price by any means known to us:)...
2. but... the Price contains information about the RELATIONSHIP of foundation, politics, rumour, gossip etc...)
1. absolutely correct.
2. But that's a complete cop-out). You can come up with anything and take it as truth, and then, retrospectively, prove it to yourself.))
And it's true that an interesting concept has emerged - the cost of stock. Is it the cost of paper and ink?
What's so interesting about it?
What's so interesting?
The cost of production of a commodity is a value that does not change after the commodity is released.
And the cost of a share changes over time - the company's assets change in value and the number of shares may be increased by an additional issue of shares
)))) you've got to be kidding me!
The price really does contain all the information available to the market. What do you mean "you can't get"?
If the price of a currency rises before the Central Bank rate is announced, then you can analytically identify what market participants are calculating based on rumours, fundamentals and policy for a rate hike.
What does it even mean to "get information"? This is not chemistry, where if there is a chemical element in a solution, you can get it from the solution.
The price really contains all the information available to the market. What do you mean "cannot be obtained"?
There is a law of conservation of information - information does not come from anywhere and does not go to anywhere, but only changes from one type of information to another.
Consequently, if information is stored somewhere, it can be retrieved.) But... For example, in the case of dependence of the price on supply and demand, one and the same price corresponds to an infinite number of values of Demand and Consumption. And it is impossible to receive a specific value of Supply and Demand from the price... If it is not possible, then the information is not given there. Because you can not get the information that does not exist (which is not put in the price).
Similarly, about rumors, gossip and so on...
But the ratio of the significance of a rumor about a rate increase, and the significance of a rumor that the rate will remain the same... The ratio of the strength or power of these rumours - is reflected in the formation of the Price.
It is not the numerous factors themselves, but the ratio of the values of these factors, which influence the rise and fall of the Price,
form the Price.