My new chaos findings implemented in forex trading

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Paul&Paul
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EURUSD at 1.2959 as determined by the chaotic behavior

Postby Paul&Paul » Tue Oct 23, 2012 2:35 pm

EURUSD at 1.2959 as determined by the chaotic behavior.
1.3084 untouched.
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NZDUSD

Postby Paul&Paul » Tue Oct 23, 2012 7:01 pm

NZDUSD dipped towards 8102 below which stops are hiding. Look for action on closes below the line.
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How can order emerge from EURUSD chaos?

Postby Paul&Paul » Thu Oct 25, 2012 4:22 am

EURUSD shows orderly fractal expansions real. Unstable Periodic Orbits are determinants of a chaotic system. If you knew that UPOs were the products of a mindless unguided process, you would not trust it.
The Initial Mystery that attends any fractal expansion is: how did the trigger reach its starting point in the first place?
We live in a very special time. The only time when we can observationally verify that we live at a very special time.
Hysteresis is the dependence of a system not only on its current environment but also on its past environment. This dependcence arises because the system can be in more than one internal state. To predict its future development, either its internal state or its history must be known. If a given input alternatively increases and decreases, the output tends to form a loop. However, loops may also occur because of a dynamic lag between input and output. Economic systems can exhibit hysteresis. Financial markets can exhibit hysteresis.
Chaos theory says that matter is not the passive substance of the mechanistic world view of our forefathers. Rather, it is spontaneously active.
EURUSD is an element of the global economic system and it is also an element of the global financial system. We do not fully understand the mechanisms of the global economy but we can understand its parts pretty well and the precision is so good that we cannot imagine why we should look for a better.
EURUSD expanded to 1.2934 from a trigger down and the pair also touched exactly 1.2919, known to be a UPO from October 15. That UPO was touched once and EURUSD reacted instantly.
Superimposed find a Fibonacci retracements extended not from the highest high and the lowest low but from the highest UPO and the lowest UPO detected for this part of the month. Note the behavior of the market near the 50% (balance? equilibrium?) and then near 38.2%.
Anyway, you might have noticed that markets care more about what they can be in the future than about their origin and their Big Bang. Physicists fear that all evidence of the Big Bang will have disappeared in the course of 100 billion years. They really care about that!
Fortunately darwinism does not explain life nor the behavior of markets.
We observe order out of chaos.
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The Day Bernanke Killed His Students

Postby Paul&Paul » Sat Oct 27, 2012 5:19 pm

Once you understand the set-up, you can skip to the climatic chapter and then the resolution and then read on through to the end.

The action, the big hands, the dead investors.

His early impassioned advocacy of Darwin's theory of evolution of free market can be ridiculed. Experts (dealers) live and breathe markets. They can thrill you with hairraising action and special effects.

The only thing they cannot do really is know if what they have seen is the movie they've made.

I recently talked to a dealer, call him a big hand man.
"Markets are different today, more sophisticated. I blame HFT (High Frequency Trading) for some sudden and devastating movements. Their algorithms contain "errors" and trigger off erratic jumps and then I fail to understand anything".
"The biggest big hand is China now", he continued in conclusion.
Markets that cost a fortune to make and had major stars, directors, traders , analysts and strategists, have China in. Everyone would go to them (the Chinese). Their trades going on to become record-breaking super-hits. The public fails to understand the problem and cares not who sucks the blood, though.
The Standard Model explains how the markets popped out of, essentially, nothing. All the books about the markets evolution had the same disquieting feature when you got to the really important part, the part you really wanted to know about, they always said that they did not know yet.
A Sceptics' Guide To Forex.

Simple system equation displaying turbulent behavior are reviewed in the light of information theory. A physical implementation of such equations is capable of acting as an information source.

In other words, UPOs act as an information source. I proposed a new method of detecting chaos in financial markets and some results of my studies have been published here.

Coming back to the title of the post, I simply liked it. The positive side of it is that there is no mention about the Night. Some physicists claim that most matter and most energy is dark, the Universe is a closed system, expanding infinitely and after some time we will see no stars and we will know less than today. Lonely, dominant and ignorant.

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The minimum range for EURUSD is 1.2949-1.2857

Postby Paul&Paul » Sat Oct 27, 2012 8:54 pm

The minimum range for EURUSD is 1.2949-1.2857 now.
These levels are determinants of the market. There are more higher and lower and each one (each UPO) is a source of information about the behavior of the system and about the activity of some players.

Only chaotic systems enable the trader to draw this privileged information from.

Unlike linear systems non-linear dynamic systems do not have an obvious link between their local and global dynamics. Intuitively, we should see "less" in more "global" time frames than in shorter scales. Indeed, evidence is there, that weeklies or monthlies whatever useful for statistical reasoning, contain
much less information than an M30 chart.

Non-linear systems can capture long memory behaviors and internal dynamics.

Traditionally business cycles research treats fluctuations as deviations from a steady state caused by exogenous shocks.

In contrast to this notion, a chaotic system exhibits fractal expansions caused by endogenous triggers, and it is mission impossible to determine a "steady" state for it, because it permanently shows instability.

In a material world we have two types of motor vehicles. One type is a consumer car pretty easy to handle and to drive. Another type is an F1 bolid, drivable only by professionals with special skills, one of the most unstable road vehicles we know.

With the markets the question is how dangerous they really are to laymen who are told that everybody can trade, and anybody can trade profitably.
In a virtual world, a poor guy used to "ordinary" traffic and the "common sense" code would not even be able to detect that sometimes he is inside an F1 vehicle. And it often is a wishful thinking that the traffic will come to a standstill and eventually reverse, probably to its mean.

A chaotic system exhibits reversals to its UPOs, which are not a mean of any kind.

One cannot bet on a return to a mean. But one can bet on a return to a UPO.

1.2949 is the nearest UPO from the upside. EURUSD returned to it twice piercing it which implies that when it closes a bit higher it will not rest there but move higher.
Farther up we see UPOs at 1.2959
1.2982
1.2991 and
1.3029.
They need to be noted and understood properly. For the sake of simplicity I write that those are the selling levels, but it needs to be added those UPOs are not ordinary selling (or buying) levels, but the levels of phase transistion, transition from laminar flow into turbulence. At the microscopic level turbulence appears highly organized. We can say that the transition from laminar flow to turbulence is an initiation of self-organization - it is the creation of order from chaos.
Hence, some (price) levels are more important than the others, despite the fact that each transaction executed is buying and selling.
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USDPLN and what makes the MF nervous

Postby Paul&Paul » Sun Oct 28, 2012 10:06 am

USDPLN is off its recent highs (3.2200) and a 106 pip trigger down is visible there. Some of Its fractal projections are marked on the chart.
USDPLN is not far from 3.1907 below which stops are hidden.
The game is to crunch the massive buying spree extending from 3.1430 up through 3.1642 to 3.1687.
You would not suspect such a tiny almost nothing candle 3.1430 on close to mark the phase transition from laminar flow to turbulence. But that was the call. The information was let's go long, guys. I do need to explain just how much it irked those who are the guardians of the country's external debt.
At the end of October there is potential in the system to dip enough into the pool of longs. But to do that we do not want watching defences but their taking over the initiative. We require sellers to produce a phase transition below 3.1907 in order not to fret about the selling from September 7 in the region of 3.2396 to 3.2260. My calculations show that 3.1907 matters in the medium term very much.
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GBPJPY

Postby Paul&Paul » Sun Oct 28, 2012 10:25 pm

GBPJPY.
"The prosecutor issued a warrant for analyst's arrest because he published a list of UPOs without special permission and violated the law on personal data."
No, it has not happened.
Scientists run the clock backwards to figure things out. Everybody knows the origin of the financial markets, unlike the origin of the universe. Still scientists argue how to treat the markets. They differ on how to make good forecasts.
They are uncertain about the future.
Scientists claim that they can explain almost everything about the matter and the universe and make firm predictions about the future. Can you trust them?
How come they are so certain about the matter and so helpless about the markets?
The laws of of the markets inconveniently vanish just before we find out what happened. Which leaves us wondering about that "one single trend". Where on earth did it come from? Some scientists have indicated that they think it arrived from outer space on a meteor or frozen comet. Others insist that that it managed to self-assemble itself somewhere here on earth somehow, in some country maybe, probably. So the origin of a trend is not the same as the theory of evolution. Evolution explains changes in the markets but not how those changes came to be in the first place. Scientists now consider that question irrelevant which is just a clever way to say they do not know or that they would not disclose the truth. The problem with spontaneous trends is quite similar to the problem of the origins of life (DNA, RNA, self-replicating clays, self-assembling amino acids). Where did the DNA and/or RNA that made up that first single self-replicating cell come from? They do not know it still. There was a single cell. After that they can explain life.
Now with the markets, do not blame traders or butterflies.
The attached chart explains all.
Expect stops below 127.74.
Selling was strong from 129.50 and it is sitting on profit quite well.
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GBPJPY cleaned up that buying area nice now trying going up

Postby Paul&Paul » Wed Oct 31, 2012 7:17 pm

GBPJPY cleaned up that buying area nice now trying going up again.
That's traitor tricky.
New buying 127.63 to 127.83 and repeated higher from 128.02 to 128.13.
GBPJPY is unstable upwards because it stays above 128.41.
The local largest Lyapunov exponent became positive above 127.81, so the system is chaotic no doubt.
It feels it got no mercy on those who had taken a loan for a wrong cause.
To make things very clear: buying is everywhere, but what I show as UPOs
is a very special kind of buying which creates a phase transition from a laminar flow to a turbulent flow. This creates a new quality in the behavior of the system. These are the fingerprints of chaos. The determinants of the market. The most important activity and the inner built memory.
Chaotic systems can be used to encrypt information.
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GBPUSD trying to break higher

Postby Paul&Paul » Wed Oct 31, 2012 8:56 pm

The battle is to gain the territory above the light violet region where sellers' stops are.
Four attempts to break higher unsuccessful but sooner or later they are bound to do it.
Other details are on the chart.
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EURUSD tight as Russia internet blacklist law takes effect.

Postby Paul&Paul » Thu Nov 01, 2012 4:29 am

It gives the government powers to blacklist certain sites. Wikipedia likens the law to the Great Firewall of China.
EURUSD is in a tight grip between 1.2982-1.2953.
The upper brown region marks the nearest selling area (1.3029-1.2997). In a second attempt to crunch shorts the band was pierced to a certain extent but some shorts are still there as well as their stops.
The fresh buying looks fragile at the moment.
Of course EURUSD exhibits chaotic properties and a lot of confidential information can be extracted from the system. For the sake of clarity, only some of it is presented here.
There are as many Lyapunov exponents as dimensions of the phase space. The Lyapunov exponent can be calculated for each dimension. When talking about a single exponent one is normally referring to the largest. Each dimension refers to a seperate trigger occurring in the system. It follows that the largest Lyapunov exponent corresponds to the smallest trigger locally detected. This in turn shows the the conditions for having a chaotic system are not difficult to meet and it is extremely difficult (but not impossible) to put the (EURUSD or similar) system into a non-chaotic mode.
It also clarifies why the system can be stable in one dimension and unstable in the other, locally and temporarily.
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