Have I found a sure-fire method for predicting the stock market?

First, let me state that none of this should count as financial advice. Having said that, I think there are a lot of problems with the traditional understanding of how stock markets work. Classic theorists would agree that:

"A crowd is at the mercy of all external exciting causes, the slave of the impulses which it receives."
-Le Bon, G. (1841). The Crowd.

Can we really hold onto this belief? What if it is actually the crowd that determines the price of a stock and not the price of the stock that determines the crowd? For years, I think society has been approaching this problem from the wrong direction. I think the primary problem is that our methods of analysis have become cumbersome and complex.

Things should be as simple as possible, but no simpler.
-Albert Einstein

I have created a very simple technique to model the seemingly irrational components of perfectly rational market behavior. Although I will not disclose how I created this model, I will say that it could not be simpler. Here is an example of the output of such a program modeling 100 days:
I was surprised how simple a process it was to create this model.
This model remains stable even if I increase the time period for which I want to run analysis. Here is another output with similar parameters modeling twice as many days:
Not only was it simple, but it is stable.
Also, it turns out that some of the initial starting conditions greatly effect the behavior of the market. Notice how much faster the model grows now than it did before. Surprisingly, the model exhibits self-similarity to the other models even at this expanded scale. Take a look at this image where such conditions have been made more favorable:
Not only is it simple and stable, but it exhibits self-similarity.


Join the conversation:

A model is great, but using it is a different story. How could I use something such as this to guide investment strategy? How could I improve such a model?

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