Key Trading Article

Science is an ever-expanding horizon of knowledge. Many of the new and accepted theories of modern physics have direct relevance to understanding market behaviour. Modern fractal theory, for example, gives us a new understanding of complex structures in nature that are built using a simple base structure that is then repeated in many degrees of size.

Many years ago, when I was looking for models to explain how markets behaved, I sought to employ my training as a physicist and translate our understanding of the physical universe into guidelines and principles that could be used to predict markets.

From the start of my career in finance as a discretionary trader 35 years ago, I have believed that the price of a market at any one time contains all aspects of the information available. Why I hear you ask?

We would all like to benefit from seeing further into the future, whether it's buying stocks, crafting policy, launching a new product or simply planning the week's meals. Unfortunately, people tend to be terrible forecasters! This is because they are part of a collective thought process. Wharton Professor Philip Tetlock exemplified this in a landmark 2005 study, saying that "even experts' predictions are only slightly better than chance". However, an important and underreported conclusion of that study was that some experts do have real foresight.