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Showing posts with label stop losses. Show all posts
Showing posts with label stop losses. Show all posts

Wednesday, 24 February 2010

Irrational Numbers: Price Clustering & Stop Losses

Universal Number Theory

One of the odder things about the universe is that the small set of numbers that define its structure, the so-called universal constants, don’t seem to have any structure of their own. You’d have thought that whatever immortal deity breathed life into the whole shebang would have at least have bothered to make sure that reality was defined in simple integer values your average gameshow contestant could remember. Yet someone’s just calculated Pi to more decimal places than you can read in a lifetime. The universe is strangely irrational, it would seem.

More likely, however, is that the irrationality lies in our heads. If you look at the way we treat numbers for investment purposes it’s probably a good job the infinite cosmos is specified in irrational numbers, because if it were otherwise we’d probably have sold it to the lowest bidder eons ago. Humans, it seems, treat numbers as an approximation to reality, unlike reality; which treats humans as an approximation to nothing.