Mathematical / Physical theories for Forex?

[samfxuk]

HI everyone
I just finished a Physics degree, and for my dissertation, was investigating the "Black Sholes" model, which as some of you probably know, is a famous mathematical model which can be used to value options.

My question is, is there any research/theories that relate the FX market to mathematics, I know that the Fibbonacci ratio is used extensively, but is there anything else?? What about probability theory.

[bazooko]

Elliot Wave is probably the closest thing to what you are looking for.

[sameer666]

but there is no maths in elliot wave, or is it :/

[tymen1]

To Samfxuk :

Forget it, if mathematics was the solution to forex we could all compute our way to being millionares!

Human beings are at work here. Mathematical equations cannot quantify emotional behaviour, and, if you can predict the future then you are really on to something. One hour in advance would be acceptable.

I am going to reveal to you the "emotionally sensitive disparity psychosomatic index" - indicators always work better when they have a substantial title.

So what is it - Just a basic bar or candlestick chart!


Kind regards, Tymen Wortel, Perth, Western Australia.

[bazooko]

Elliot waves are mostly cycle recognition but fibos play big part of the waves so there is some math in there but when looking at the big picture you are probably right by saying no math. Sorry!

[yari123]

sam, your in obviously a great advantage over others. physics degree is very popular in the financial field, you can work for firms, designing statistical models, and so on.

you could have a look at chaos theory, and investigate neural networks, there are a lot of use for math/physics in finance.

number crunching will definitely not the only solution to riches, obviously, but there are many firms out there, who will value scientists, and this is the trend in general.

[tymen1]

To Yari123 :

I did an applied physics degree myself and i can say that Sam could possibly use it in various financial fields.

But as an aid to try to predict where the next forex trend is going - no way!
Forget it - I simply cannot see that. As i have already said, mathematics is NOT an aid to prophecy.

The only use it has is that you can understand the mathematical derivations of the indicators better.

And what use is that? Especially if you do not use indicators.

I think that some of the most uneducated people actually make the most money on forex. Correct me if i am wrong.

I honestly cannot see any use for my degree in working the forex market.

Kind regards, Tymen Wortel, Perth, Western Australia.

[yari123]

if physics/math degree was a way to riches, why the department would overflow and the professors would ditch their job!

although you can't directly apply the theories here, its undisputable truth that growing number of financial institutions are seeking out number crunchers. they construct usually probability, statistics model to help them "guide/confirm/estimate" various risks and other doodads, its one of the most high paying jobs that is if you can fight the competition.

[bonechair]

There is proof that maths do play big role.
The winner is using probability neural network.

[triphop]

Bonechair - a couple of months of huge winnings don't prove anything at all; there are dozens of v. simple systems that have huge winning streaks over the course of a year, without anything that complex. They can also have massive drawdowns.

There's a great book called A Mathematician Plays the Market by John Paulos that's worth a read, if only to serve as a warning against over-analysing the market with maths.

That said, I don't doubt there are great jobs to be had using mathematical analysis in the financial industry - I'm sure Northern Rock had a few number-crunchers on their books - but I wholeheartedly agree with Tymen that as a way to trade forex, less is definitely more.