Fibonacci Sequences, Pascal's Triangle and The Market

The rarely updated blog Exotic Stock Market Techniques has an interest post all about Pascal's Triangle and the Fibonacci Sequence.  If you enjoy reading about math or probability you should read the entry.

The image on the left demonstrates something I didn't know which is that diagonal slices of the triangle, when summed, form the famed Fibonacci sequence.  Here's what the blog says:
The deeper you get into the heart of Pascal's Triangle the closer you get to the Divine Proportion. What does it all mean? Who knows for sure. Perhaps it is enough to leave with the thought that the detritus of large numbers of simple binary decisions, like the left or right of the pinball, or the buy or sell in the pits, leave footprints in space and time that may be impossible to recognize while happening but become clear enough down the road if you know where to look.

And this is where we run into problems.  The millions of numerical data points produced each day (price, volume, time, stochastic data, etc.) are a tantalizing attraction to the mathematically inclined, in hopes that they may break the stock market's code.  Like the character in the movie Pi, people have driven themselves crazy and broke in search of the hidden order.  But there's a fundamental difference between finding a surprising pattern in Pascal's triangle and finding a pattern in the markets.  The pattern in the triangle won't disappear once everyone knows about it.  No rule can persist like this in the market.  The mere act of many knowing about a pattern, and then acting on it, changes it, and the hunt begins anew.

Comments

[catablast! media grp.]

glad you mentioned "pi"

what a great movie -- it's sad that not enough wall street practitioners have seen this movie.

for all us monomaniacal stock junkies, the data + pattern- obsessed behavior at the center of "pi" reminds us just how insane the (wall) street life can be.