As prices are formed in the FOREX market


We know from physics that near equilibrium second law of thermodynamics leads to the gradual decay of the fluctuations. Equilibrium system is usually described in terms of averages, because the state of equilibrium is stable with respect to various fluctuations and noise that constantly disturb these averages.

And what happens to the fluctuations in the highly non-equilibrium system? In this system, the fluctuations can no longer be just noise and can be a factor in directing the global evolution of the system. Near equilibrium, as a rule, the cause-effect relationships operate more or less normally. But the system is significantly deviate from the equilibrium position, as the very reason for the evolution becomes a victim of circumstances. This sluchae we can only deal with probabilities, and no increase in knowledge is not possible to restore the broken causality and predict which eventually have the system.

On the other hand, the price fluctuations themselves at a certain time interval may be the birth of the trend on the other, much smaller time scales. Such a trend will join again peoples weight speculators took a position on this trend and thus changing the very conditions of supply and demand, which up to this point were based on fundamental laws. As a result, the market may become highly non-equilibrium with the deviation from the average price of four or more sigma (standard deviation prices researched currency). In this case, understanding the dynamics of the exchange rate movements of the asset is only from the point of application of elements of fractal geometry to the analysis of the market.

On the "long memory" of the market

Fractal hypothesis of financial market explains the existence of the financial market of the nonlinear stochastic process. This process, in turn, is the generator of a long-range effect - the effect <long memory> Market (longmemory process). The essence of it is that the price of a random walk is, however, quite a long time (much more than the theoretically estimated time horizon of the market) keeps the memory of their past, and the numerical values in the process <random> evolution still focused on them .

Indeed, the market is constantly find different combinations, proportions and combinations, which makes it quite successfully predict the subsequent development of the market, despite the chaotic process of price formation in shallow investment horizons. I have often not only demonstrated the existence of a long-range effect, but also showed the ability to measure its length (including bars). And this is - a direct way to test your technical indicators for the true and false alarms [1, 4].

The main issue of pricing in the market FOREX - whether accidental prices of basic, highly liquid financial instruments? Trader-<geek> often explores the historical behavior of the selected asset to the audit of a technical indicator, for example, MACD, which he uses in real trading. In this case, it must be sure that the correct prediction made by MACD, is not accidental, but based on the ability to predict the indicator turns on discernible or market correction.