A variant of the proof of the first axiom of Dow - page 6
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The main thing is not to forget that profit is a derivative of two components - production cost and revenue (income), and I would add taxes.
Unfortunately, the dear TC has not responded to my comment about the inferiority of his chosen cost classification.
Yes, it was and still is determined by a simple, "arithmetic" formula (1), but it does not allow you to analyze the patterns of profit changes depending on the selling price of goods and changes in the ratio of supply and demand. You learn about changes in profits after the fact and cannot fully optimise the trading process. Only with appearance of formula (2) that I mentioned in my article"Market theory" https://www.mql5.com/ru/articles/1825, scientific community was informed that it is possible to optimize trade process by setting optimal selling price that guarantees maximum profit under the existing situation with supply and demand.
The public has known about the optimal selling price of a trading firm's goods since the development of microeconomic models and linear and non-linear programming.
But what does this have to do with the long-suffering Dow?
The public has known about the optimal selling price of a trading firm's goods since the development of microeconomic models and linear and non-linear programming.
But what does this have to do with the long-suffering Dow?
1. I responsibly declare that the public did not know that the optimal price could be calculated unambiguously with mathematical accuracy on the basis of actual trading data, but, as you mentioned, tried to approach it on the basis of various models and methods, based on the search of various trading options using, among others, programming.
2. While, a variant of the proof of the Dow axiom is based on the equality of formulas (1) and (2). The first takes into account both price and quantity of goods sold, and the second takes into account only price, and in spite of this difference, both formulas give the same result. On the basis of this fact, we conclude that Dow's axiom, which is now no longer an axiom, is valid.
The so-called "Dow axiom" is designed for the stock market. What is the "cost of production of a commodity" for a stock market brokerage firm?
Are you sure it is only to the stock market?
Do you have any idea what the "cost of production" of a stock is?
The so-called "Dow axiom" is designed for the stock market. What is the "cost of producing a commodity" for a stock market brokerage firm?
I will answer you soon. You need to give a detailed answer. I will also reply to all those who have not had a chance to answer. I just did not notice how heated the discussion became.
OK, I will wait.
Just to add that in my view, the Dow statement itself works when the asset (including the conditional production cycle) of the market is relatively stationary and takes into account the interest in the product (shares) depending on cyclical factors affecting it and other external factors not affecting the product itself. For example, the cost of an asset(product/good) has remained unchanged, but the appetite for risk (cheap money/greed) has increased, then the price will rise, and this phenomenon can be cyclical. That is, price history cannot predict what external or internal events will be, it can only show how the market will behave when these events occur.
When I look at the trading practice I often see the price reach a certain level before the important news releases and if the news are in favor of the further price movement, the level is broken successfully, and if the market didn't guess with the news, it can make a false-break (hairpin - depends on the TF observation) and turn around with an acceleration from the previous level, or immediately move in the opposite direction.
No, kiddo, arithmetic.
You still don't get it - simple arithmetic is enough to prove the functional dependence of profit on price.
Are you sure it is only to the stock market?
Do you have any idea what the "cost" of a stock is?
Again - Dow was formulating his "axioms" for the stock market.
No, I have no idea what the cost of a stock is
Thanks, that's hilarious, imagine a toddler who's 75 years old.) Have you even looked at the article? Formula (2) is from the article. It's got quadratic equations and derivatives. Do you think it's all arithmetic? But most likely you have not bothered to read the article, and were guided by the principle: - Pasternak not read, but condemn unanimously.)))
No, you're shitting in the thread again without understanding - the functional relationship between the profit of a manufacturing company and the selling price of its products is described by a formula with two minuses. Simple arithmetic.
All the other "calculations" are just a naive attempt by the writer to draw someone's attention to his article.
1. I responsibly declare that the public did not know that the optimal price can be calculated unambiguously with mathematical accuracy on the basis of actual data of real trade, but, as you mentioned, tried to approach it on the basis of various models and methods, based on the search of various trade options using, among others, programming.
2. While a variant of the proof of the Dow axiom is based on the equality of formulas (1) and (2). The first takes into account both price and quantity sold, while the second takes into account only price, and despite this difference, both formulas give the same result. On the basis of this fact, we conclude that Dow's axiom, which is now no longer an axiom, is valid.
1. The optimal price and the formulas for its calculation in connection with supply and demand curves were derived long ago and are studied in the first year of any economics university in the section of Microeconomics.
2. Naturally, that they have very little practical application, since the calculation of supply and demand curves can only be carried out empirically and the curves themselves are dynamic and vary depending on many factors constantly. 3.
3. the relationship between the profit of a manufacturing company and the price of a product has nothing to do with the so-called "Dow axiom".