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Equation for ALL financial markets

  • #1
  • First Post: Jul 28, 2010 10:00pm Jul 28, 2010 10:00pm
Just a thought I had...

What would you do if you just happened to discover (and you are the only person who has) an equation which models (with 100% accuracy) ALL financial markets.
  • #2
  • Jul 28, 2010 10:18pm Jul 28, 2010 10:18pm
Quoting MoForce
Just a thought I had...

What would you do if you just happened to discover (and you are the only person who has) an equation which models (with 100% accuracy) ALL financial markets.

i would still trade my personal accounts and not tell anyone, well maybe 1 or 2 other ppl. I would try to make as much money as I could so that I could help people all around the world that are suffering from poverty, injustice etc, I would want to leave my mark on the world as a great humanitarian, not some investor who made a lot of money. I think therein lies a big moral problem with some of these hedge fund managers who rake in billions of personal wealth every year and dont really make an impact on the world......im sure you would make more money than you would ever need......if you sold the idea to banks it would only cause problems beyond our wildest dreams
  • #3
  • Jul 28, 2010 11:10pm Jul 28, 2010 11:10pm
  •  Ideasmiths
  • | Joined Mar 2009 | Status: 一将功成万骨骷 Forex war! Win pips or die! | 30 Posts
Quoting MoForce
Just a thought I had...

What would you do if you just happened to discover (and you are the only person who has) an equation which models (with 100% accuracy) ALL financial markets.
A bit of rain on your parade...if you watch the trillion dollar bet, In 1973, three brilliant economists, Fischer Black, Myron Scholes, and Robert Merton, discovered a mathematical Holy Grail that revolutionized modern finance.

Before this, many mathematicians tried to create a insurance for the stock market (ie 100% accuracy) so that there is NO risk forever. However, there were simply too much variables, weather, market cycle, time etc.....the main obstacles being human fear and greed.

So when this Black Scholes formula was invented, it won them the nobel prize because it is the 'midas' touch, it will NEVER lose. Well, the rest is history, the inventors lost their shirt and caused a financial crisis.

So to answer your question, if I were very smart or lucky to discover an equation, I will name it Mayan-something-catchy-name and start marketing it in the market like elliot waves and fibonacci numbers.

Remember, the only people who got rich during the california 1948 gold rush are those that sold the buckets and shovels
  • #4
  • Jul 29, 2010 3:32am Jul 29, 2010 3:32am
I'd employ a monkey to trade for me and I'd look for another challenge.
forget about tomorrow, just steal away into the night
  • #5
  • Jul 29, 2010 4:37am Jul 29, 2010 4:37am
I'd continue to do as I do now ... keep my mouth shut.
  • #6
  • Jul 29, 2010 7:15am Jul 29, 2010 7:15am
yeah, keep your mouth shut man.

much much safer.
  • #7
  • Jul 29, 2010 8:51am Jul 29, 2010 8:51am
What about the effect that you yourself would have on the market with your own trades? Your trades would mess up your predictions. Even if you had a really good 'formula,' eventually nobody would be willing to trade with you, or when you did trade it would be at a substantial price concession, thus limiting your potential.

Then say that you had this god given formula that would enable you to never lose again. Eventually you would kill your own profit machine because all your liquidity would dry up. You'd become the ultimate source of exchange for business and supply and demand would be dead because you would be operating under a sort of dictatorial fashion where you would name whatever price you felt like at the time. All that would happen is that everyone would eventually reorganize somewhere else and refuse to let you participate.

The point is that if you are 'sombody' in the markets, your own trades cause unforeseen effects on price. It truly comes down to the old greed and fear factor. I reckon that a magic formula cannot exist precisely because the markets are not static. You might have a good formula for the market right now, but in five minutes you'll need a new one because the market will have changed.
  • #8
  • Jul 29, 2010 9:03am Jul 29, 2010 9:03am
Quoting MoForce
Just a thought I had...

What would you do if you just happened to discover (and you are the only person who has) an equation which models (with 100% accuracy) ALL financial markets.

I'd post it on ForexFactory.
So now go ahead and do it!
  • #9
  • Jul 29, 2010 9:47am Jul 29, 2010 9:47am
These guy's formula worked really well, well, maybe not.

http://www.investopedia.com/articles...t-brothers.asp
  • #10
  • Jul 29, 2010 12:12pm Jul 29, 2010 12:12pm
There is a formula for pretty much all markets but especially true to forex.


It goes something like this:


Order Flow + Information Flow = More Money than George Soros


It worked 50 years ago, works today, and will work 50 years from now.
Private message me for a link to my order flow website.
  • #11
  • Jul 29, 2010 5:13pm Jul 29, 2010 5:13pm
Quoting mfoste1
i would still trade my personal accounts and not tell anyone, well maybe 1 or 2 other ppl. I would try to make as much money as I could so that I could help people all around the world that are suffering from poverty, injustice etc, I would want to leave my mark on the world as a great humanitarian, not some investor who made a lot of money. I think therein lies a big moral problem with some of these hedge fund managers who rake in billions of personal wealth every year and dont really make an impact on the world......im sure you would make more...
Yep, I'd keep my mouth shut and exploit this formula to its maximum potential.

mfoste1, don't forget the impact that billionaires, and even upper-six-figure-ionaires, make on people's well-being just through their spending. Money flows from the top down, so the more money that's spent, the more jobs that're created. More jobs equals more secure lifestyles for families, as well as less poverty.

Rob
  • #12
  • Jul 29, 2010 6:10pm Jul 29, 2010 6:10pm
Keep my pie hole shut and collect the money.
  • #13
  • Jul 29, 2010 6:55pm Jul 29, 2010 6:55pm
I'd enjoy it right up until my alarm went off, then I'd get up and go to work.
  • #14
  • Jul 29, 2010 8:39pm Jul 29, 2010 8:39pm
Quoting MoForce
Just a thought I had...

What would you do if you just happened to discover (and you are the only person who has) an equation which models (with 100% accuracy) ALL financial markets.
I'd know that it's false, because there is no magical formula (at least not one that can be known). The only way to predict with 100% accuracy is to know every order before it hits the market. If I did somehow stumble across that information, I would know that I am not long for this world.
  • #15
  • Jul 29, 2010 11:28pm Jul 29, 2010 11:28pm
I am still new at forex but I wonder where does all the profit money come from

We are all here to be successful traders and make money but if we are all making lots money it has to ultimately come from somewhere

I dont believe there are lots of unsuccessful traders that loose money everyday and all the successful traders make money off that, unsuccessful trader will never invest a huge amount and wont last long in this profession

But somebody has to get hurt down the line

My best guess is, lets say you make money of USD/JPY going short. That means US economy didn't do so well and all the consumers in the US were not able to buy as much as they usually would have from the money they earned by working (people in the US were not able to get there money worth, we got it instead)

without much understanding beyond this I draw the conclusion, rich people are exploiting the poor. Riches get rich and poor get more poor everyday.

so in the future if automated trading started and was always successful, I wonder what will happen do the whole society
  • #16
  • Jul 30, 2010 7:27am Jul 30, 2010 7:27am
Quoting mailpeni
I am still new at forex but I wonder where does all the profit money come from

We are all here to be successful traders and make money but if we are all making lots money it has to ultimately come from somewhere

I dont believe there are lots of unsuccessful traders that loose money everyday and all the successful traders make money off that, unsuccessful trader will never invest a huge amount and wont last long in this profession

But somebody has to get hurt down the line

My best guess is, lets say you make money of USD/JPY going short....
One way to look at it is if USD is going down, usually the stock market is going up, so people's retirement accounts are growing. If USD is going up, it means the economy is strengthening enough that inflation is becoming a concern. Either way, something good is coming from it.

When you're trading you're trading with other traders. If you make a profit it doesn't mean the Smith family in the heart of the Ozarks is going without food. Trading isn't rich versus poor, it's trader versus trader.

If you profit from price fluctuation, what do you do with the money? You spend it, either sooner or later. By you spending money you help to keep the economy moving, which leads to greater employment.

I suspect you have it in your mind that all economies are a limited pie, with larger and smaller pieces being redistributed. In a Free Market this isn't the case - our economy is dynamic. This means many people can become rich without it negatively affecting the poor.

Rob
  • #17
  • Jul 30, 2010 7:52am Jul 30, 2010 7:52am
Quoting MoForce
Just a thought I had...

What would you do if you just happened to discover (and you are the only person who has) an equation which models (with 100% accuracy) ALL financial markets.

Are you ok Man? i think you are really suffering from some kind of disease. I advise you to go and see one good Physician.

This is financial market..don't talk about 100% accuracy.
  • #18
  • Edited 9:03am Jul 30, 2010 8:42am | Edited 9:03am
Quoting mailpeni
I am still new at forex but I wonder where does all the profit money come from

We are all here to be successful traders and make money but if we are all making lots money it has to ultimately come from somewhere

I dont believe there are lots of unsuccessful traders that loose money everyday and all the successful traders make money off that, unsuccessful trader will never invest a huge amount and wont last long in this profession
Slightly OT, but see PDF for an answer.

It's also why brokers are constantly churning for new clients: they need fresh money for themselves and the top-feeders to take to the cleaners. See Victor Niederhoeffer, Education of a Speculator. It's a Darwinian feeding process/ecology. New traders are like the Gulf oil slick, ie. they stick around but get eaten up surprisingly fast.

On the societal benefits/costs of "trading"....

1 - In "real" sector trading mainly (that is, in real goods and services in domestic transactions between consumers and businesses, and also in international transactions between countries, ie. international trade), the net benefits of trade are positive. It's a positive sum game, with more folks benefitting to a very large extent than losing (despite all the nonsense pedalled by anti-globalization folks). See Martin Wolf, Why Globalization Works. Positive sum game.

See theory of "comparative advantage".

2 - In "nominal" or financial market trading, like FX, the benefits are harder to see. Not saying they aren't there, just that it's much more complex. It's beyond me. The risks of system meltdowns from dodgy financial transaction with huge leverage are huge (re the near-death experience of the world economy the last 2 years from AIG, Lehman brothers, etc., but complicated by "real" household/home speculation). Much more risky than Al Qaeda, ironically (the real WMD were on Wall Street right under our noses, not in Iraq). Warren Buffett certainly thinks so. Very complex question, but possibly a negative sum game overall (given huge meltdown risks).

We may still be going into deflation, like Japan in late 80s, early 90s, which continues. Fed is apparently getting worried.

http://economix.blogs.nytimes.com/20...-of-deflation/

http://www.nytimes.com/2010/07/30/bu...omy/30fed.html
Attached File(s)
File Type: pdf Trading is Zero-sum.pdf   80 KB | 571 downloads
  • #19
  • Jul 30, 2010 10:16am Jul 30, 2010 10:16am
Thank you bit9ret and Rob Mondave for your response. I will defiantly be looking into your reference material and try to understand this.

If automated trading does begin to work and it really has a negative impact then a near term financial crysis will take care of it, else it might turn out to be something for the better like globalization.

In my 6 months of forex even though I have only managed to loose my $250 mini account more than once, I still don't think brokers make a large portion of their money by new traders loosing money, because new traders will never get to buying a 1 standard lot, so all the money lost cant be very large, or can it?
  • #20
  • Jul 30, 2010 10:23am Jul 30, 2010 10:23am
Quoting zamzen
Are you ok Man? i think you are really suffering from some kind of disease. I advise you to go and see one good Physician.

This is financial market..don't talk about 100% accuracy.
lol I'm fine... i'm just hypothetically speaking
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