Discussion of article "The price movement model and its main provisions (Part 2): Probabilistic price field evolution equation and the occurrence of the observed random walk"

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New article The price movement model and its main provisions (Part 2): Probabilistic price field evolution equation and the occurrence of the observed random walk has been published:

The article considers the probabilistic price field evolution equation and the upcoming price spike criterion. It also reveals the essence of price values on charts and the mechanism for the occurrence of a random walk of these values.

There are currently two main types of access to foreign exchange liquidity.

  1. Market making – a foreign exchange liquidity provider, which fulfills orders of brokers' clients who have agreements with that provider. These banks work only with large brokers and volumes,
  2. Liquidity aggregators are used by small brokers.

The main liquidity providers have complete information about their depth of market with bid and ask prices and their volumes. Based on the lower boundary of sell offers, the provider determines the Ask price for its customers, and from the upper boundary of buy offers, the provider forms the Bid price. In other words, the reducible price, in fact, consists of two components. Speaking about the wave field of the price, we mean one of these components. 

The corresponding prices, in essence, are determined by all those traders, associated with the quotes provider, who form their orders based on their market data. All market participants receive their data from a single information space for the whole world. Data is obtained almost instantaneously. Therefore, the price is reduced not only by the provider alone but also by its multiple clients whose role in the formation of price values is much greater than the role of the provider itself. Besides, due to the unity of the information space and the instant access of clients to it, the prices reduced by different liquidity providers turn out to be much similar.

Now let's talk about the ontology of the relation between reducible prices and emergent price waves. To reveal the topic, let's make a block diagram presenting the main elements of the complex system of relationships between the probabilistic and the reducible elements for the market.

Author: Aleksey Ivanov