Potential New Site

In previous posts I have mentioned, with few details, a potential way to display the state of the trading network. Over the past few weeks I have been playing with the idea and progress is being made. The site, Particle Markets, will be the center of these new ideas to publicly and freely display the state of trading networks.

Currently the site displays a simple, 2D Ising type model, progressing through time. There are 176,400 total traders, and they all start with Long positions. As time progresses many of the traders sell and become either neutral or short. All traders are long/short 1 share. The summation of their numbers after each time step determines the change in price of the traded security.

Short positions: RED
Long positions: GREEN
Neutral: BLUE

This is a simple model. Future models will incorporate more details. I hope to be able to use actual data one day and display daily changes in the actual human network; in the same way a meteorologist shows viewers his Doppler radar to warn of storms, Particle Markets will be able to show investors the “market weather.”

The concept applies mostly to the stock market, since a trader holds a contract which has no “delivery date.” I hope to apply the same ideas to commodity markets.

Future Update Ideas:

The Bubble Index with Fake Data

Here are two examples of random data ran with the algorithm of The Bubble Index. The first is a Geometric Brownian Motion and the second is a Weiner Process. It’s interesting to note the the shorter time frames (52, 104, and 153 days) never reach more than 20 and most of the time lie below 10. The longer time frames (256, 512, 1260, and 1764 days) can sometimes spike to large values. Comparing the output of the Geometric vs. non-Geometric Brownian motion, one can note the effect of exponential growth in the corresponding larger values of The Bubble Index. (Values are standardized)

The Crisis of 2008-9 – Dow Jones Industrial

The following PDF shows The Bubble Index before and after the Crisis of 2008-9. Unlike the 1764 day index, which does not display a spike before the panic, the 10080 day index clearly shows a massive increase. And the same happens with the 20160 day index. What’s striking is that this increase started in the early 1980’s. This increase reaches a peak in November 2008.

Download 10080 Days PDF

Download 20160 Days PDF

DJIA 2008 Crisis – The Bubble Index