I came across the field of econophysics and read papers by researchers from abroad.
I then considered how physics could be applied to analyze stock charts in my own way.
１．Introduction
I recognize that stock market movements are not influenced by physical phenomena, making it difficult to apply physical laws. Additionally, predicting stock chart movements is equally challenging. However, the fact that research in econophysics is advancing worldwide made me think there might be laws for analyzing stock chart movements from a physics perspective.
Stock charts are graphs consisting of two elements: price and time. The technical methods commonly used by investors are also means to grasp their relationships. Therefore, I see great potential in econophysics as a new way to understand the price and time that make up stock charts.
２．From the Perspective of Physics
First, I considered how to utilize the elements highlighted in econophysics. Many papers mention various elements, but I focused on fractal structures, chaos theory, and general relativity.
Fractal Structures
Other papers have shown that stock chart movements have fractal characteristics. I have felt the same while analyzing and patterning stock chart movements. Hence, I thought about how stock charts should be patterned.
Chaos Theory
I have confirmed cases where small errors or irregularities significantly impact stock chart movements. Specifically, I have observed that market crashes, commonly referred to as "crashes," do not happen suddenly. Instead, small-scale crashes in short time frames gradually lead to larger movements.
General Relativity
While it is difficult to apply the concept of gravity from general relativity to stock charts, I believe the element of time can be utilized. Particularly, in the case of temporal distortions in stock charts—rapid changes or prolonged stagnation—I aim to deepen my research on the relationship between volume-induced mass and temporal distortions, interpreting the gravity in general relativity as mass.
３．Technical Analysis Perspective
I would like to integrate the methods from physics into technical analysis of stock charts as follows.
Elliott Wave Theory
This method involves patterning the movements of stock charts and incorporates the concept of fractal structures. By considering movements in smaller time frames, we can predict movements in larger time frames, thereby forecasting future trends.
Cycle Theory
Similar to Elliott Wave Theory, this method allows for the patterning of chart movements, focusing on the time axis of stock charts. It is used to measure more accurate patterns.
Fibonacci
In addition to stock chart analysis, Fibonacci is used as a model in nature and physics. It helps in creating pattern models of chart movements.
４．Conclusion
As mentioned above, it is possible to replace the theories used in physics with technical methods in investment, allowing us to capture stock price movements from both physics and economics perspectives.
Specifically, to view stock charts more objectively and simply, we categorize them into patterns based on Cycle Theory. In this process, we classify the ratios of the impulse and corrective waves in Elliott Wave Theory to match the Fibonacci ratios.
By patterning in this way, it becomes possible to analyze the fractal structure characteristics of stock charts. However, there are instances where chart movements become distorted without forming neat patterns. We analyze these irregularities, caused by volume-induced mass distortions, from the perspective of general relativity.
Moreover, since small irregularities can sometimes trigger larger irregularities, we will study these features in conjunction with chaos theory.
