For those who have (are) seriously engaged in co-movement analysis of financial instruments (> 2) - page 19
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Let us imagine that the whole market is 100 FIs. Since it is the whole market, the FIs are interconnected with each other in the following way: if from one FI has decreased, this has been redistributed to the others. This is analogous to the law of conservation of energy. That is, our market is a closed system. And 100 FIs represent a "Ring". This means that any FI can be absolutely calculated through 99 others.
Now let's imagine that we don't know any information about one of the FIs. How will you look for correlations between the remaining 99?
Money from one FI can go to a completely different market that is not in your "ring".
And absolutely all markets and all money, imho, cannot be closed in one "ring", at least it is a very, very difficult task.
The law of the conservation of the money supply is not entirely correct, because the issue of currencies is constantly changing and most often upwards due to inflation.
That's what I mean.
It's just that changes in the exchange rate of a currency pair can be influenced not necessarily by other FIs in that market, but by inflows of money from other markets.
This is where Dick is right. The price of an individual FI for currency pairs is calculated trivially through two currency pairs. That is, if we know the prices of two of the three FIs forming the ring, then the third FI is trivial.
Simply put, in order to calculate the whole currency market: major and cross, only the major is necessary and sufficient, as the cross is trivial.
The law of conservation of the money supply is not entirely correct, because currency issuance is constantly changing and most often upwards due to inflation. But it can be used as a rough approximation.
))))) You are confusing the concepts of inflation and emission. Is issuance the cause of inflation? Maybe one of the causes of inflation is money supply emission?
Closure of the market is a reality. Capital does not disappear or disappear, it only changes form. The only problem is that to display a closed-loop system you have to take into account forex, all the national equity markets of developed countries, bond and bond markets, commodity markets, commodity markets, bond markets, etc. This is virtually unrealistic.
Creating a lock of three currency pairs for three currencies
Let ( x, y, z) be different currency pairs of three currencies, locker ( a, b, c) be the volumes of open positions that create a lock.
If ( a, b, c) creates a lock, then, for any k<>0, ( k*a, k*b, k*c) is also a lock. The k is used to choose the direction of the lock and normalize the total position.
Patterns
Currency pairs of three currencies may form two patterns.
Let's define the ranks of the currencies that make up the pairs, by calculating using the following algorithm.
2.1 Select currency pair
2.2 The currency rank in the numerator is increased by 1, the currency rank in the denominator is decreased by 1
3. End of cycle
Obviously:
The sum of the ranks of all three currencies is zero;
The ranks of the currencies may have the values: 2, 0, -2
Corollary:
There exists a currency that has a rank of 0.
Let x, y be currency pairs formed using a currency that has rank 0 (i.e., one currency in the numerator and one currency in the denominator).
Then only two patterns are possible:
z = x * y, this is the main pattern;
z = 1 /(x * y), an unnamed pattern (very rare).
For the main pattern ( x, y, x*y) the locker is ( -y, -x, 1).
For an unnamed pattern ( x, y, 1/(x*y) ) the locker is ( y, x,(x*y)^2 )
Creating a three-currency pairing loco for three currencies
How complicated you are.
Here's the simplest way to put the eu and the pound together.
Money from one FI can go to a completely different market that is not in your "ring".
And absolutely all markets and all money imho it is impossible to close in one "ring", at least it is a very, very difficult task
I quote myself:
Let's imagine that the entire market is 100 FIs. Since it is the whole market, then...
The whole market is not FOREX, not the fund. It is the whole world. We cannot analyse the whole market. But, like in mathematical theories, we first imagine the whole, and then we "put it down".
So the whole market is closed. And it is not the law of conservation of the money supply.
So the whole market is closed.
What will it give us in a practical sense?
So we have seen money flowing from one FI to another (others), and then what? It can flow at any time and anywhere. How can you make money on this?
It can spill over whenever and wherever. How can you make money out of it?
"Anytime-anywhere" cannot. If it could, the distribution of first quotation differences across all markets would be normal. And it is not.
That is why normal (statistically-educated) traders lose. ;)
To quote myself:
The whole market is not FOREX, not the fund. It is the whole world. We cannot analyse the whole market. But, like in mathematical theories, we first imagine the whole, and then we "bring it down to earth".
So the whole market is closed. And it's not the law of conservation of the money supply.
You say no(?), there are results in practice (where something really works (account)), or will you continue to surf the net?
SZS: If the whole market is the whole world, then there should be a global trend upwards. People's desire to be in profit and that means an upward mindset.
"Any-when-anywhere" cannot.
I did not mean here the randomness of money flowing from one FI to another.
It is clear that there are reasons for asset spillovers (buying/selling) and they are not random, i.e. there are real people with real goals behind such movements.