Are the movements in the capital markets a random system?

Introduction

At first glance, anyone looking at the effects of the market movements reaches the conclusion that the various lines and colors appearing on price charts resembles the scribbles of a two-year seeking to compose a beautiful abstract masterpiece. This initial premise leads many to conclude that the movements are random and the future moves are unpredictable such that nobody knows what is likely to happen in the future. Obviously for those adopting such a position reflects their limited awareness of the multiple influences impacting the system known as the markets. After many years of study and being around the markets, I have come to realize that all movements in the market are the result of natural law because nothing in the universe is random; every move is ordered. During this presentation, you will learn three points: how the market moves in definable waves with distinct amplitudes and troughs. How the rallies and reactions are the results of the magnitude of the forces impacting the market, and finally how the apparently random nature is a reflection of the chaotic influence governing all complex systems.

Markets move in waves,

similar to that of the ocean's wave. In fact, the ocean's ripple, tide, and wave observed are akin to the price movements in the markets as reflected by its various time frames such as daily, weekly, and monthly. Being aware of the duration of the minor, intermediate, and major trends supports an investor's decision by trading in harmony with the current trend. Since the price wave has a distinct amplitude; it automatically infers that the period of frequency of that wave can be known in advance. As a result, with the proper instructions, studies, and understanding, any investor can know in advance, when the wave high or low will occur. Because this principle is universal and fractal in nature, its structure is applicable to the various times associated with the markets. For example, with some busy work, you can analyze intraday highs and lows; in addition, you can extend your analysis out to the larger time frames for greater rewards.

Since each wave has a distinct amplitude and trough, it is logical to conclude that the current and future movements are ordered and measurable. The price is going to a specific angular destination whose angle can be measured and known in advance. For example, being aware of where the price is within the 360 degrees that comprise the circle, you know that at the zero points, the price will seek to rally towards its 90-degree angle. Obviously, the advance will not happen in a straight line i.e. from zero to 90 degrees. Under normal conditions, the price will rally and react from zero to 30 degrees pause for some sideways action before seeking to attempt the 45-degree angle. The same process of rally, reaction, and pause occurs until the prices get to their 60 and 90-degree angles respectively. The 90-degree angle is the highest point in the wave which is also known as the highest high that the price will experience. After the price completes its 90-degree angle, it will begin its reaction towards its 180-degree angle with the usual counter-trend rally and reaction until the maximum low, or its lowest low during the wave frequency, is touched at its 270-degree angle. As you can conclude, the amplitude/trough factor alone nullifies the random nature of the price action.

As an example, the Euro/Dollar spot currency contract posted it 90-degree cycle high at 1.2115 on February 25^th^, 2021.

Following the 90-degree angle cycle high, the spot currency contract reacted to its 270-degree angle cycle low on March 31^st^ at 1.1703. As of Friday, April 16^th^, the EUR/USD closed at 1.1980.

Another example can be seen with Zoom Video Communications (ZM). The 90-degree angle cycle high was posted on Monday, Oct 19^th^ 2020 @ $588.84. (ZM) reached its 180-degree angle cycle low on Monday, March 8^th^ at $309.00. The 270-degree angle is expected around the $200.00 mark.

There is a specific force, whose magnitude influences rallies and reactions. It is the force that moves the price to change its position over time thereby creating a net change. The relationship of the force relative to the price ranges and the closing price establishes principles -- many of which will be covered in future blog posts. You will learn about the principles such that you will be persuaded without a shadow of any doubts that the markets not random. For example, the magnitude of the force determines the amount of displacement the price is expected to experience during a specific time interval. As the thrust of the displacement diminishes in either direction, the price signals a potential change in trend -- another element that nullifies the random nature of the price action. This is akin to a car going uphill as it runs out of gasoline. The obvious tends to follow i.e. a move back downhill.

Finally,

the confluence of the various elements comprising the markets gives it an appearance of randomness when such complexity would more suitable suggest the chaotic nature of the markets. The market's chaotic structure represents a higher level of order in that what you see today you will never see repeated tomorrow or at any time in the future except for a variation thereof. That is one of the reasons why a mechanical approach to market analysis may work well during the backtesting periods and fail miserably during the live market. In short, Haven learned that the market moves in definable waves with distinct amplitudes and troughs; that the rallies and reactions are the results of the magnitude of the forces impacting the market, you have the foundational grounds to finally judge how the apparent random nature is a reflection of the chaotic influence governing all complex systems. The three credible points to confirm and nullify that markets are predictive to a degree and will never ever be random as some experts would have you believe.

Sunday April 18^th^, 2021 @ 10:10 ET