Application of physics in trading?

Obviously, price is not subject to the laws of physics: it is not effected by gravity, friction, or any other kind of physical force. However, I'd argue that there are parallels to be made between the two subjects. For example, if mass was comparable to volume, and velocity was quantified using an indicator such as ADX, there would be numerous basic (mechanics) equations that could be used in trading, such as:
Momentum = Mass*Velocity = Volume*ADX
Kinetic Energy = 0.5*Mass*Velocity^2 = 0.5*Volume*ADX^2
etc

Has anyone successfully tried applying these concepts before?

hey ponzi...... inertia comes to mind.... the parallel should be obvious.....

sometimes it can point out divergences not seen in macd.....h

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Yes.

First thing that comes in mind is indeed inertia. The volume is not a good analog to the mass because the mass in a close system is constant while the volume varies a lot. There is no evidence of inertia in the market. If there was inertia then no trading activity (no forces applied) would result in a constant direction and velocity and the market would trend in straight line during the week-end! Also there should be mainly rounded tops/bottoms and very few sharp turns. The chart posted by hayseed just above shows exactly the opposite.

Yet I use this "price-particule" model. Without loss of generality the mass is normalized to 1 (we just don't know the unit). Because a massive particle can't change its position instantaneously, what price does, I consider the price-particule to be observed with noisy measurements. When the variance of the noise is set to a low value the model follows the swings. I built a parameter free zig zag indicator this way. The variance is estimated by fitting a 2nd order polynomial to thre price.


When the variance is much bigger you follow the trend. In the picture below the blue dots are a non causal filter using 42 prices in the future. The line "tracks" it but in real time. The background color is a classification of the trend (neutral, up/down, strong up/down). The oscillator is the velocity and 0.5, 1 and 2 standard deviations above and below. Circles in yellow are significant swings as produced by the previous filter. The yellow crosses are pivots not considered significant enough. The last image is the state of the filter where the values of the non causal smoother are not yet known.

I've seen a few papers like:
http://apmr.management.ncku.edu.tw/c...0904222241.pdf

But I've never paid much close attention. From all I've seen they all had good results though.

[quote = PipMeUp; 7648063] A primeira coisa que vem à mente é de fato a inércia. O volume não é um bom análogo à massa, porque a massa em um sistema fechado é constante enquanto o volume varia muito. Não há evidências de inércia no mercado. Se houvesse inércia, nenhuma atividade comercial (nenhuma força aplicada) resultaria em uma direção e velocidade constantes e o mercado tenderia em linha reta durante o fim de semana! Também deve haver principalmente topos / fundos arredondados e muito poucas curvas fechadas. O gráfico publicado pela hayseed logo acima mostra exatamente o oposto. No entanto, eu uso esse modelo de "partícula de preço". Sem perda de generalidade, a massa é normalizada para 1 (simplesmente não conhecemos a unidade). Como uma partícula maciça não pode mudar de posição instantaneamente, qual o preço, Considero que a partícula de preço deve ser observada com medições ruidosas. Quando a variação do ruído é definida como um valor baixo, o modelo segue as oscilações. Eu construí um indicador de parâmetro de zig zag dessa maneira. A variação é estimada ajustando um polinômio de 2ª ordem ao preço de três. {image} Quando a variação é muito maior, você segue a tendência. Na figura abaixo, os pontos azuis são um filtro não causal usando 42 preços no futuro. A linha "rastreia", mas em tempo real. A cor de fundo é uma classificação da tendência (neutro, para cima / baixo, forte para cima / baixo). O oscilador é a velocidade e os desvios padrão de 0,5, 1 e 2 acima e abaixo. Círculos em amarelo são oscilações significativas produzidas pelo filtro anterior. As cruzes amarelas são pivôs não considerados significativos o suficiente. A última imagem é o estado do filtro em que os valores da suavidade não causal ainda não são conhecidos. {image} {image} [/ quote]

Could you go over this computational programming? Or it could indicate some study on physics applied to FOREX??

Yes.

They all called Trajectories and Vectors. Some of the concepts mimic both Scalar and Vector quantities. The entire OHLC stream mimics or can be thought of as a Quanta of sorts where each "price" becomes data point within the Quantum Structure - the Market itself is Quantum Structure-like when viewed in this way through the lens of the OHLC stream. Each data point is connected and forms a Trajectory having both Direction and Magnitude. Combined, those Trajectories form Vectors and Vectors form the Quantum Field (The Market). The Market is less a ridged object in so much as it is a Dynamic Variable Structure, much like the theoretical Quantum Field.

For trading purposes, it becomes useful to know or have information about which Trajectory and which Vector is Dominant and which is Subordinate. It is probably beneficial to think of the Delta between Trajectories and Vectors as "Mass" in the form of Magnitude. Specially, Market Magnitude which can be witnessed and measured using something as simplistic as ATR or ADR. I use OmegaWave. A variant of ATR and ADR concepts.

So, as a practical matter and less pure theory, the objective of the Trader would be to find a way to position their capital somewhere in the Market (Quantum Field) where it has a higher degree of probability for being "influenced" (acted upon - Force concept) by the Dominant Trajectory (if you are a Day Trader) or the Dominant Vector (if you are more of a Position Trader).

Both Trajectories and Vectors are "positively charged" and "negatively charted" - at the same time - but in two different Directions. This is where things get strange. If you position your capital in the right place within the Quantum Structure (Market Structure), you actually have a higher degree of probability for making a profit by entering in either direction without regard for Directional bias.

In other words, by shifting focus and observation about what "Market Structure" is - one could literally enter either a Long or a Short and have a significantly higher degree of probability for generating profits than by taking a biased Directional approach. This is because, within the Quantum Field, both Positive and Negative Trajectories and Vectors are always active. However, the degree to which they are active is always found in their relative Magnitude.

One of the inspirational tools I used in the development of my trading ideas over the years was this:



Which (in my mind) can also be seen in this:



Which eventually helped me to produce this:



And, its digital form:



The Double Helix also played a role to inspire my work as well:



This DH (at lest in my mind) reminded me of my TCD concept. When I first saw that many years ago, I got the distinct impression that the "Market" might exhibit behaviors that were in fact predictable - at least to some degree. So, I pursued and over the course of many years, I refined my concepts to the point where I could then use them as a Trader on a consistent basis.

Inspiration is where you find it. For me, there has never been two bigger and more important inspirations in my Trading than that which came from the world's of Physics and Biology. There have been plenty of other inspirations but these two were the "Patriarchs of Ideas" that most influenced my thinking relative to Trading the Markets.

Hope that inspires.