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Psychology, Mathematics and Numerology

  • #1
  • First Post: Jul 1, 2010 5:33pm Jul 1, 2010 5:33pm
Just finished watching the movie PI. There was an important distinction made in how the main character should use mathematics to discover patterns in the market and not numerology.

That got me thinking. There seems to be three main categories that trading systems fall into.

1. Mathematics based systems. These systems are mainly based upon the use statistical patterns. An example of this type of system would be statistical arbitrage pair trading. These system are usually developed by people with extensive backgrounds in physics and mathematics. The math for these systems is intense and those types of skills I gave up in favor of fewer brain cells through the consumption of Alcohol.

2. Psychology or systems based upon human behavior. These systems are based upon observations of the market. For instance support and resistance really are well know behaviors of a market. We know that people are afraid to be the first to move into new levels and refuse to go lower than past levels. This is something I can understand, fear and greed.

3. Numerological based systems or myths. Ok this could be a gray area, but candle patterns. What is the science behind them? Someone says that this bar followed by that bar indicates strength or weakness. There is nothing to support these assertions. If you look at the well known candle patterns, historically the results are as good as a coin flip.

Just curious about a couple things.

1. Do Fibonacci based systems fit into Mathematics or Numerology?
2. Why aren't their more models of human behavior in the market. I would think that with the computers I use an agent based model of several thousand entities could be built to model and understand maybe even predict a market, like EUR/USD.
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  • #2
  • Jul 1, 2010 6:21pm Jul 1, 2010 6:21pm
Quoting redpine
Just finished watching the movie PI. ......
Good to see you back posting again after a few months' absence.

Not sure how directly these address your points, but there are good posts about the relevance and general effectiveness of patterns here and here.

FWIW, I posted some general thoughts on the different types of charting tools and techniques here.

Quoting redpine
2. Why aren't their more models of human behavior in the market. I would think that with the computers I use an agent based model of several thousand entities could be built to model and understand maybe even predict a market, like EUR/USD.
The psychology that drives the market might remain constant (fear and greed are near-irresistible emotions, and humans are invariably creatures of habit), but the problem remains that it's extremely difficult for a model to 'know' (assuming TA is the only source of info) who the participants are at any given point, and what their agenda is.

David
  • #3
  • Jul 1, 2010 7:30pm Jul 1, 2010 7:30pm
π is a fairly obscure film, so in case anyone's wondering what the OP is on about, here's one of my favorite clips. I believe the entire film may be on YouTube in 4 parts.

Inserted Video
  • #4
  • Jul 1, 2010 7:46pm Jul 1, 2010 7:46pm
Quoting hanover
Good to see you back posting again after a few months' absence.

Not sure how directly these address your points, but there are good posts about...
Never left, just more of lurker. Patterns are interesting, I've spent quite a bit of time trying to exploit them to include algorithms to match specific patterns all the way to using ANNs, genetic algorithms and reinforcement learning. No luck, so I'm dropping focusing on patterns for awhile.

Modeling and simulating behavior is something, I am already a bit of an expert at. My BA is in Psych and I write simulation models of things. I want to look at state machines of behavior in the market. I think to model the market, TA doesn't help much, I'm thinking more about tick behavior. It more closely represents the fear and greed of the moment. But time will tell. My SQL database currently has 6 months of ticks in it for 21 pairs. Lots of data that should keep me busy for awhile.

Dan
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  • #5
  • Jul 1, 2010 7:49pm Jul 1, 2010 7:49pm
Quoting capitalist88
π is a fairly obscure film, so in case anyone's wondering what the OP is on about, here's one of my favorite clips. I believe the entire film may be on YouTube in 4 parts.

http://www.youtube.com/watch?v=YldowmD89ng
The movie has no answers, it's just a good flick. Reminds me of the twilight zone.

I wonder how many of us looking for that holy grail look like and act like the character in the movie?
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  • #6
  • Jul 1, 2010 8:11pm Jul 1, 2010 8:11pm
IMHO I think that you may need fractal and chaos theory as well as statistical skills in order to model the market.

Fractal is interesting. I once watched a professor used a fractal approach to model a crown behaviour at a stadium entrance/exit on Discovery channel. I guess the same technique can be used on financial market too.
  • #7
  • Jul 1, 2010 8:26pm Jul 1, 2010 8:26pm
Quoting redpine
... My SQL database currently has 6 months of ticks in it for 21 pairs. Lots of data that should keep me busy for awhile.
..
wow, how large is that, size-wise?
thanks Sir!
  • #8
  • Jul 1, 2010 9:09pm Jul 1, 2010 9:09pm
Quoting supremeChaos
wow, how large is that, size-wise?
thanks Sir!
My database takes about 20GB and the last I checked it was 198 million rows. Lots of data, lots of fun.
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  • #9
  • Dec 10, 2016 5:13am Dec 10, 2016 5:13am
¿What stuff you know about changing prices?.

I think that the market is based in accumulation and distribution the whole market. I think with accumulation and distribution you can detect the size of candles in a de determinated time, the speed of prices relative to time, the time that will took to g-
o in a certain place. Based in the accumulation and distribution maybe l could detect the market speed and the size of the candles with a relative price back in the past. I think this information is very important, I think the people should investigate more about I say.


I will put an example of market.

In the next image l will talk about the high volume (bar with number 4 in the top of the bar). The Fourth candlestick was big because of the accumulation of the bars one, two, three lf you see the first bar was a bar with low volume based with the volume of the bar the next candle will be with low volume, if the bar candle is a up candle and no have the necessary volume to go up then logically could be down or stay the price in the same place. the bar with number three at the top of the candle was a up candle because no have the necessary volume to go down and then go up but no was a relatively high volume because of the volume of bar 2, the bar with number 2 at the top volume plus the volume and the candle with number three at the top of the candle the volume it is not relatively high, bar with number 1 at the top of the bar volume plus bar with number 2 at the top of the bar volume the volume is not relatively high. Bar with number 1 at the top of the bar volume plus bar with number 2 at the top of the bar volume plus bar with number 3 at the top of the bar these candles not have the required volume to go up then in the fourth bar is big because of the accumulation of the previous three bars if we compare the first fourth bars volume the fourth bar have more volume that the other first three bars bar with number 1 at the top of the bar volume plus bar with number 2 at the top of the candle volume plus bar with number 3 at the top of the bar plus bar with number 4 at the top of the candle the result is a fifth candle with high volume.

Captura de pantalla 2016-12-09 a las 3.43.19 p.m..png
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  • #10
  • Dec 10, 2016 5:15am Dec 10, 2016 5:15am
You think that is necessary to have a knowledge in mathematics and physics?.
  • #11
  • Edited 6:50am Dec 10, 2016 5:38am | Edited 6:50am
good questions. interesting thread.

below you can find two videos with 2 completely different ways to make fractals using "numerology" i.e. numbers. almost like a left and a right hand, but which is what, & how can one apply it to the market? Why did Leonardo Pisano Bigollo present his findings to the world in base 60 rather than in base 10? Time? Why is the whole world so stuck/hung up on the Due Decimal system? Who Knows.



Inserted Video


https://www.youtube.com/user/lucienmation

Also, speaking of Pi, mathematicians say that Pi is found everywhere & therefore can be found in the markets. Some have attempted to do that. Research Pi Cycles, if you like.
Inserted Video
gann said it was all about right angles didn't he? again, who knows
  • #12
  • Dec 10, 2016 5:46am Dec 10, 2016 5:46am
Quoting whateveridon
You think that is necessary to have a knowledge in mathematics and physics?.

If you view the market as a living breathing organism with an energy all its own, since it is a collection of humans & algorithms, then yes, absolutely physics applies. It applies in the same way that it applies to a bunch of bugs trying to eat each other. Research synchronization in nature. It is very interesting, even if you aren't a math guy. It is in fact a proven way in science to PREDICT: Yes that's right, a proven scientific way of predicting the future. The truth is that it can be found with research. Application is beyond me.
  • #13
  • Dec 10, 2016 6:34am Dec 10, 2016 6:34am
Rather then Math based system. Just look for patterns that repeat.
For example I expect volatility in certain pairs to pick up once London opens.. Traders often will only hold the trade until USA is about to open... then they will Take profit going into USA open/USA news.
By knowing this pattern, I know when to start looking for an entry and when to exit.

Another example.. When risk is on ,(stocks going up), traders will usually be buying High yield currency such as Aud and NZD, and will be selling low yield such as CHF, JPY.
These are patterns, after watching for years, I can use to put the odds in my favor.

Another example.. If DAX is dropping Euro usually going up, as people sell DAX and go back into safety of euro.
Nothing is 100% holy grail, but learning tricks like these helps to put odds in your favor.
The only system that will work is one designed by and for yourself.
  • #14
  • Dec 10, 2016 5:31pm Dec 10, 2016 5:31pm
Quoting dagoods
{quote} If you view the market as a living breathing organism with an energy all its own, since it is a collection of humans & algorithms, then yes, absolutely physics applies. It applies in the same way that it applies to a bunch of bugs trying to eat each other. Research synchronization in nature. It is very interesting, even if you aren't a math guy. It is in fact a proven way in science to PREDICT: Yes that's right, a proven scientific way of predicting the future. The truth is that it can be found with research. Application is beyond me. ...

Then l think that could be true that the market make movements basically because of banks, they buy and sell like in the same time for avoid losing. Maybe the markets could be complex but not random.
  • #15
  • Dec 10, 2016 5:35pm Dec 10, 2016 5:35pm
Quoting bloodpoodle
Rather then Math based system. Just look for patterns that repeat. For example I expect volatility in certain pairs to pick up once London opens.. Traders often will only hold the trade until USA is about to open... then they will Take profit going into USA open/USA news. By knowing this pattern, I know when to start looking for an entry and when to exit. Another example.. When risk is on ,(stocks going up), traders will usually be buying High yield currency such as Aud and NZD, and will be selling low yield such as CHF, JPY. These are patterns,...
I think the market make movements because of mathematics, the price is different sometimes but the mathematical procedure is the same.
  • #16
  • Dec 10, 2016 7:18pm Dec 10, 2016 7:18pm
In the future l will explain more about the speed markets, why sometimes the price move fast, slow and not moves, the factors that make speed markets, time accumulation, volume accumulation, not time accumulation and not volume accumulation, relative accumulation of time and volume, the past, future and maybe the present of accumulations. I will include the candle size or price size estimated and maybe an introduction to a language that l think of create to measure the price correctly.
  • #17
  • Dec 11, 2016 11:12pm Dec 11, 2016 11:12pm
Maybe the banks sell at up and buy at down all the time but in a specific time!. I think is the basic of offer and demand; Maybe they follow a plan probably the market is not random!.
  • #18
  • Dec 11, 2016 11:15pm Dec 11, 2016 11:15pm
If the markets were random probably the banks would not make money by investing in foreign exchange. Maybe they are not dumb.......
  • #19
  • Dec 23, 2016 3:17pm Dec 23, 2016 3:17pm
I discovered four factors about market process! Force, volume, velocity and time. (Based on my re-search) All four factors are correctly essential for the process! The prices follow a habitual process.

You meet people who do not have knowledge about the habitual process l think your "best" option would be to "take" their opinions as options.
  • #20
  • Jan 1, 2017 7:56pm Jan 1, 2017 7:56pm
Don't waste brain power trying to figure out the when's and why's of completely random market movement. It does not matter. You might see patterns and think you can predict this, or predict that, but in reality...Anything can happen at any moment by anyone. True? You have no idea what will happen next. It is also true that you do not need to know a single thing about the market to make money. You can simply look at a chart and just guess and make money. Yes?

If I am walking down a sidewalk and you are following me and I reach a street corner, what will I do next? You have an assumption, but no real certainty. I could keep moving forward. I could turn left. I could turn right. I could turn around. In the market, there are thousands of traders on that sidewalk, so if you do not know what I will do, how can you possibly know what all the rest of them will do?

That is not to say you cannot make profits. Group the behavior into a sample size you are comfortable measuring and then find the cosecant of the trade. While you are wasting your time theorizing human behavior, I simply measure it and use those measurements to develop a profitable strategy. In my opinion, you are researching the wrong things.

The market moves by activating pending orders. The frequency of buy and sell is pure speculation, but it can be measured because there is normally an overall direction for a brief period of time. That is your focus. Nothing else. Market makers move the market by accepting buys and sells whenever they freely choose. Should I say it one more time? A market maker must accept your trade, or it will not happen. They will normally do this in consequential order of similar requests in a similar direction until they decide to take the opposite order and follow the similar orders in that direction. If you are not using a method to track the sequence, you are clueless.
You cannot be extraordinary by being normal
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