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Strategies & Market Trends : Technical Analysis- Indicators & Systems -- Ignore unavailable to you. Want to Upgrade?

To: Mark who wrote (3129)	4/12/1998 9:06:00 PM
From: Spots	Respond to of 3325

>>As you know the idea of applying physics, fluid mechanics...etc. to finance and TA has been tried by many. No, I'm afraid there's no "as you know" that can be applied to me in regards to TA. You may well take my disclaimer as TA-challenged as modest rhetoric, but I assure you it is the literal truth. Understated, actually. As a matter of fact, my dissertation was in statistical mechanics (a close relative of thermodynamics). But what I was using for analogy in the post today was simple dynamics (mechanics). It's related to statistical mechanics in a conceptually complex but actually fundamentally simple way, mostly in the same sense you might try to apply particle dynamics to markets. That is, you have to smooth out the jitters or you can't get anywhere. But statistical mechanics can treat non-equilibrium situations (which thermodynamics can't). But this is carrying the analogy too far (if it has any validity at all). In statistical mechanics, you don't identify individual particles. You might try statistical methods on the market averages, but I think if there's any applicability it would be to treat them as particles with more exactly applicable dynamics and try to determine the forces on them (again by analogy) as a composite of market forces on the individual constituents. In short, heavy particles with particle dynamics. I wouldn't try thermodynamics; that's about the approach to equilibrium states. Clearly the market is NOT a approaching a steady state equilibrium. If that's been tried, I can tell you without looking it fell flat on its face. What a hairbrained notion! Heat death of the DJIA as it sinks into a sea of entropy ... <glug>. Fluid mechanics isn't a hell of a lot better. It isn't about equilibrium (in the same sense as thermodynamics), but it still concentrates on steady states and their breakups. I think turbulence is beginning to be understood, but it's still about statistically highly predictable dynamics with jillions upon jillions of component particles. Naw. Same for chaos theory. Pooh. These makes no sense in the market if you want to analyze individual stocks (or at least you'd have to show me how it does--I'm too dim to see it). You have to treat individual stocks as particles, I think, or at least that's the way my analogy runs. Particles with varying mass, I might add, if you could validly equate mass to market volume, which adds its own interesting aspects. Still, the dynamics would be computable if the dynamical rules could be stated (even if they're probabilistic rules). Especially in the short term with 300mhz PII's or Alphas to do the heavy lifting. <ggg> Mind you, I do NOT believe any of this; I'm speculating. But the parallels to particle dynamics strike me strongly nevertheless. I was only half joking about trying to work out the dynamics of it (but I WAS half joking -- I have no serious notion that anything useful might come of it). - - - The deepest mathematical reading I've done so far is on Eliot wave theory. I don't presume Eliot was an idiot, but the mathematics of the book I picked out of the blue is laughable; the treatment is almost mystical. I'm enjoying it, though, irrespective of that. Let me look it up ... "Fibonacci Applications and Strategies for Traders" by Robert Fischer. I hope there's something more rigorous. Wiley should be ashamed of themselves -- the editing is atrocious (filled with mathematical errors and outright baloney). I guess that shows my decadence because I'm still enjoying it. It certainly shows my TA ignorance because I'm at least learning what a lot of the words mean (or should mean) as they get tossed around. Well, again I've gone on far too long. I will spare you my wife's comments <ggg>. Regards, Spots PS. You write pretty well yourself, and a happy Easter to you too.