Stock Market Forecast: Chaos Theory Revealing How The Market Works
I Know First Research | May 8th 2014
How Can We Predict the Financial Markets by Using Algorithms?
Common fallacies about markets claim markets are unpredictable. However, chaos theory together with powerful algorithms proves such statements are wrong. Markets are chaotic systems with complex dynamics, yet to a certain extent we can make valid stock market forecasts. Using these forecasts generated by cutting-edge predictive algorithms together with a careful risk management strategy may give a trader a significant competitive advantage.
Markets Are Complex Systems
Looking at the common fallacies about stock markets, we can see two major groups. The first group is connected to the classical economic theory, which claims that markets are 100% efficient, and as such unpredictable. However, trying to make predictions regarding the markets is useless anyway, as no stock can be possibly be a better deal than another. Both of them are efficient and everybody in the market has perfect information available to them. From our daily lives it is obvious that this does not truly reflect reality. There are people who actually profit trading stocks, which should not be possible in this idealistic market of economy theories.