Is it possible to calculate the prices of stock market trends with calculus?

[ZQrn]

Perhaps this works when you are spreading millions across a ton of different stocks, but for the small investor that can only afford a few, I doubt that there would be any longterm success.

I guess the expectancy value of trusting the maths is higher than trusting the instincts of the average casual stock investor though.

That needn't imply that the expectancy value in either case is positive, of course.

 

[cronxeh]

I can tell you definitively that any math that you use for long term prediction of the stock market is going to be 100% wrong. There is absolutely, unequivocally, unfathomably, no doubt in that.


The only valuation you can use is the Warren Buffet method. Trust the people that run the company, trust the product they are selling, and have an outlook for the future. That is why he does not invest in tech stocks - considering India just came out with a $36 iPad, there is no clear certainty in the market. I even remember when I bought Apple for 78 bucks a share and offloaded it at 109. It was just a flimsy game, a short term fling.

Warren on the other hand, had a vision, with the exception of the airline industry

 

[ZQrn]

I can tell you definitively that any math that you use for long term prediction of the stock market is going to be 100% wrong. There is absolutely, unequivocally, unfathomably, no doubt in that.

Just as any long term prediction for the trajectory of a bullet, but people are still made to believe you can do that with calculus.

Also, define: 'long term', define 'wrong' et cetera et cetera.

 

[cronxeh]

Just as any long term prediction for the trajectory of a bullet, but people are still made to believe you can do that with calculus.

Also, define: 'long term', define 'wrong' et cetera et cetera.

Over 24 months, 'wrong' as in you will be off by anywhere between 2 and 3 standard deviations from your prediction. Oh and this does not apply to the really-really stable stocks like KO and MCD

 

[Office_Shredder]

That's strange, because long term the market grows, and that's pretty un-debatable (unless you're talking about long term to the point that we see the dollar collapse and the US is not a country or something) It's short term that's a problem

 

[ZQrn]

Over 24 months, 'wrong' as in you will be off by anywhere between 2 and 3 standard deviations from your prediction. Oh and this does not apply to the really-really stable stocks like KO and MCD

Okay, if I fire a bullet, can you calculate with calculus where it's going to end up in 24 months time?

Because I was taught that you could project the trajectory of a bullet with calculus, in fact, I think the answer on this forum would be uniformly 'YES!' if people ask if this is possible.

 

[cronxeh]

That's strange, because long term the market grows, and that's pretty un-debatable (unless you're talking about long term to the point that we see the dollar collapse and the US is not a country or something) It's short term that's a problem

Wrong. The market does not 'grow' it constantly shrinks and collapses, just to have the whales emerge strong through the turmoil. I haven't noticed any actual positive news in last 2 years from the stock market, or for last 10 years really, or for last 20 years for that matter. 1987, 2000, 2009, its just all a giant epic failure

'Calculus' is not applicable. Even Ito's calculus with Brownian motion is not very applicable. Its just not analytical in nature. It is driven by whims and fears, by big money, and by greed of the corporations, investors, politicians, moms and pops, the Chinese, the Japanese, dirty knees, etc


Oh and you want to know why calculus does not apply? Because the stock price is nowhere differentiable

 

[alt]

Speaking of calculating share markets, etc, has anyone heard of Gann Theory ?

http://www.acrotec.com/gann/gann.html

Apparently it's still around today - and spoken of very little. I think I heard from somewhere that it costs many thousands to subscribe. Not my cup of tea, but interesting stuff. I wonder what others think ?

 

[Office_Shredder]

According to his followers, the accuracy of W. D. Gann's prediction was up to 85%. His predictions actually were not restricted to financial market, Gann also gave predictions on the election of US President and the beginning and ending of World Wars. Gann claimed that his every forecast was solely based on mathematical principles. With sufficient information, he could forecast the forthcoming events with his cycle theory based on ancient mathematics and geometry. In his mind, the nature of things had not changed, all of the events were based on mathematical principles.

What are the mathematical principles?

W. D. Gann said that the 360 degrees of a circle and the numbers from 1 to 9 were the origin of mathematics. In a circle, there may place a square and a triangle. Outside the circle, we may also construct a square and a triangle. These constructions are in fact the dimensions of the market.

Ummmm what?

If someone had the ability to predict anything, they certainly wouldn't waste their time making money by selling the technique to other people

 

[alt]

Ummmm what?

If someone had the ability to predict anything, they certainly wouldn't waste their time making money by selling the technique to other people

Yes, that's always been my view too. If I had a failsafe (or nearly failsafe) system, tha last thing I would want to do is sell it to someone, or worse, to many.

This Gann Theory thing is intriguing though. Perhaps it IS just a hundred year old spruik - it's unlikely that there's more to it. But I recall years ago, I did some solid research into it and it had me intrigued. Might have another look - if only to confirm that it IS a spruik.

 

[elfboy]

Could you please show us one of these derivations?

It's part of a unified theory of the stock market being developed. It's a set of equations that describes the mechanics of a stock.

Consider a stock like AAPL which had a daily trading volume of over 100 million shares at a price of 260 dollars. If an apple insider were to liquidate a large volume of shares in a single trade (a million shares for example) the stock of AAPL would logically pike lor and if the shares were sold gradually the stock may be relatively unaffected. Those are some of the obvious observations that make up this theory.

So how much would apple fall if someone were to sell 1,000,000 shares in a 1 minute interval? It would come across resistance on the left hand side of the chart. It would not go to zero, but be stopped by a resisting force.

define the energy level of a stock trading though time a time interval as price*slope equation*volume. As stock rise energy is created or destroyed. The energy level is given explicitly as:

P(X) is the equation for the chart and V(X) is the equation for the volume

A stock market energy diagram: