Discussion of article "The price movement model and its main provisions (Part 1): The simplest model version and its applications"
Main idea 5: "... However, due to many other factors affecting the price (apart from the balance of supply and demand, which also has probabilistic nature), its movement is also probabilistic in the sense that it does not clearly determine the future price but instead sets the subsequent distribution of its probabilities, which is characteristic of market prices at all times - past, present and future."
"...the price is objectively described by the probability distribution, and the group of waves, describing the price movement in the form of a model, describes the movement of its distribution."
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Main Idea 6:
"... Such modeling becomes possible. Moreover, it becomes more objective due to the presence of a huge number of market participants and their close interconnection in a single system, in which, therefore, statistical patterns of their cumulative action arise. ... However, in case of the analytical approach, the price waves turn out to be detectable and existing..."
"... , just like its emergent parameters that formally break away from the activity of the numerous market participants who jointly create them, gaining their own reality."
Or Financial Market regime change (see attached):
Or Structural break (see attached).
Structural Break Models vs. Regime Change Models | ||
|---|---|---|
| Regime Change Models | Structural Break Models | |
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| |
" In a way, we can think of structural change models as a very special case of regime change models, in which each possible "regime" occurs only once."
https://www.aptech.com/blog/introduction-to-markov-switching-models/
Hi.
Where i = ?
-
— starting actual amplitude of 
mode oscillation, -
— its fading ratio, -
— mode oscillation frequency, -
— wave vector of its distribution along the 
price scale , -
— oscillation initial phase, - while is a single function defining the moment the
oscillation starts. 
Hi.
Where i = ?
- — starting actual amplitude of mode oscillation,
- — its fading ratio,
- — mode oscillation frequency,
- — wave vector of its distribution along the price scale ,
- — oscillation initial phase,
- while is a single function defining the moment the oscillation starts.
Here "i" is a complex unit in the exponent of the exponent (then the exponent becomes a sine type).
Regarding the first picture. I agree. Probability distributions, like wave packets, will, of course, spread out over time, increasing their half-width.
This is encoded in the exponent, where the exponent is the time multiplied by the damping factor.
Now for your other two charts (one showing momentum and retracement, the other showing breakout and reversal).
The concepts (ideas) that are given in my article are simply the ideological basis of the mathematical model of price movement developed by me. By themselves, these concepts can neither be confirmed nor refuted by any price charts. But, if the mathematical model itself is already able to explain the price movements shown by you on the charts (and my mathematical model explains this), then these charts will serve as confirmation of this model. Such questions are considered by me in the third article, which will soon be released.
Yes, the model of Markov switching of modes, the link to which you provide, in order, as I understand it, to explain the reversal in the second chart, of course, is interesting, but this is a purely technical model of changing the characteristics of the time series and nothing more. My model is much more fundamental and goes to the very foundations of pricing and the market's own processes.
Main idea 5: "... However, due to many other factors affecting the price (apart from the balance of supply and demand, which also has probabilistic nature), its movement is also probabilistic in the sense that it does not clearly determine the future price but instead sets the subsequent distribution of its probabilities, which is characteristic of market prices at all times - past, present and future."
"...the price is objectively described by the probability distribution, and the group of waves, describing the price movement in the form of a model, describes the movement of its distribution."
===========================================================================================================
Main Idea 6:
"... Such modeling becomes possible. Moreover, it becomes more objective due to the presence of a huge number of market participants and their close interconnection in a single system, in which, therefore, statistical patterns of their cumulative action arise. ... However, in case of the analytical approach, the price waves turn out to be detectable and existing..."
"... , just like its emergent parameters that formally break away from the activity of the numerous market participants who jointly create them, gaining their own reality."
In principle, your graphs can serve as good illustrations of the ideas I present. Thank you.
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New article The price movement model and its main provisions (Part 1): The simplest model version and its applications has been published:
The article provides the foundations of a mathematically rigorous price movement and market functioning theory. Up to the present, we have not had any mathematically rigorous price movement theory. Instead, we have had to deal with experience-based assumptions stating that the price moves in a certain way after a certain pattern. Of course, these assumptions have been supported neither by statistics, nor by theory.
Forecasting the price movement using the equation (4) is problematic and unreliable, due to the difficulty of identifying the parameters present in it, the presence of fundamentally irremovable uncertainties in the parameters and, most importantly, due to frequent unpredictable (according to the simplest model) strong random jumps. Fortunately, oscillators are able to sort these large unpredictable jumps and have predictive power. However, they have one extremely significant drawback, which is a lag inherent in all moving averages those oscillators are based on. Therefore, along with direct price forecasting, it might be even more promising to arrange the forecasting of such indicators, which eliminates their lag.
Author: Aleksey Ivanov