Trading Chaos

It’s well known that the heart has to be largely regular or you die. But the brain has to be largely irregular; if not, you have epilepsy. This irregularity, chaos, leads to complex systems.It’s not all disorder. On the contrary, I would say chaos is what makes life and intelligence possible.The brain has been selected to become so unstable that the smallest effect can lead to the formation of Order.—Ilya Prigogine

Chaos can be termed as a higher form of Order.I would not much go in the intricacies as it is more scientific learning . I have tried to put an implied form of chaotic behavior in trading by the below example.

Take the case of above example if we try to throw a ball from point C definitely it is going to roll on the curve and eventually settle at point B or D as this is the balancing level.But how far the ball will reach i.e point A or point C depends on the force exerted on the Ball.

In many cases it would happen that the Ball after reaching A would tend to come at B and then again move towards Point A or Point C depending on the force exerted. Also note that if the force exerted is more than we may cross the point A and thus complete a full circle and reach point C.

Imagine the Ball as NF. Every Day we have with us a Pivot (B or D) the opening C and A either support or Resistance.What we have to look at is the volumes (force) at the equilibrium point B or D. Depending on the volumes we would then initiate a trade at equilibrium point B or D. If we reach at point A or C then we reverse our position or book out as the ball (NF) will again try to come to equilibrium point B or D.The cycle never completes.Only we have to identify the equilibrium points and volumes at that particular point. Remember that the nature of market is dynamic and equilibrium points changes every hour, day with the kind of  force(volume) exerted.

Many permutations and combination can be worked out . I leave on you to come up with more on this theory.

Will come shortly with left brain and right brain and how it affects trading.