Wave Action, from Jim Sogi

August 3, 2012 |

 Even granting the the Elliott stuff is garbage, the opposing linear forces of buyers against sellers subject to a vig forms wave like patterns. All other waves can be modeled. Why not market waves?

Leo Jia writes: 

I'd love to hear others' comments on this. My take is as follows.

The market waves are actually constantly measured and modeled by market participants. These people then use their models to conduct trades on the market. This very action, as performed by many, then causes the underlying market wave to change its attributes, which then fades the models in use and causes the people using the models to lose money. This gives many the impression that market waves can not be modeled.

Perhaps akin to Heisenberg's uncertainty principle, which was initially mistaken as the observer effect, the above view of the market might be misconstrued. The uncertainty principle was later understood to actually state the matter-wave dual nature of quantum objects, regardless of the observation.

Aren't market participants very similar to quantum objects in this sense? What is the dual nature of people? Can't we say greed-fear?

Jeff Rollert writes: 

I would argue the periodicity, or perhaps wavelengths, vary as do ocean wave patterns reflect long distance, off shore storms.

Long ago, I read somewhere that polynesian males hung over the side of boats naked, so their "sack" could sense current vs waves for navigation.

Perhaps the model should include waves and divergent currents.





Speak your mind

2 Comments so far

  1. Bill Wolfe on August 4, 2012 2:23 pm

    In my opinion, it is impossible for there to be motion without a wave rhythm. Identifying them in the stock/futures market is not as difficult as one might think.

    Visit and for some very accurate examples.

  2. drdimick on August 7, 2012 1:33 pm

    The Polemics of Pricing as Wave Motion in Nonlinear Market Spaces: A False Premise?

    If you have not considered Wilmott’s notations, see…

    Yes, wave patterns as distributions of pricing are modeled… Have been right along with the evolution of electronic circuitry, yes?

    Yet, as the chair recently quipped, using fractals when attempting schemes of normal distribution (including waves, I presume) were not the answer — as others advocate in trading strategies.

    How is it that linear correlations of market pricing as wave patterns abound — as do formulations of variances in time (e.g., fibs appear popular) – yet, when assimilated into a program trading architecture, fail to capture real time efficiencies of a given market exchange?

    In that prices channel (or operate in nondirectional states), the polemics between buyers and sellers – as a directional force, which are estimated to occur 20% during a given market cycle – become a false premise. Then the supposed (up/down) polemics generating any given wave (pattern) of price action cannot be quantified; therefore, any such buyer/seller diametric does not exist as a continuum for purposes of quantifying relative motion of any such exchange.

    So, yes, one can model market pricing as wave motion. The failure is an inability to recognize how events relative to such linear correlations – with varying combinations of trend, cycles, momentum, fractals, support/resistance – are quantified within nonlinear spaces of convergence/divergence during price action.

    Wilmotts notes that “almost all the equations” in finance are linear.

    Accordingly, we may surmise that the disconnect (or absurdity) of financial modeling is that absence of defining and quantifying the corresponding/contravening states of nonlinear market exchange, within which wave-like price action enter and exit.



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