Phi, the Golden Ratio, and Predicting Stock Prices with Quantum Physics
When it comes to picking stocks, or picking a winner in anything, everybody’s got a system. A magic calculation that can tell the future.
Well, here’s mine …
Above, you can see a historical stock graph and 3 spiral swirls. But not just any kind of spirals … golden spirals. The golden spiral is based on the golden ratio. Otherwise known as Phi.
Phi is a mathematical pattern that we see everywhere in nature, from the shape of seashells to the very structure of our galaxy. It’s everywhere. The Golden ratio which is 1 to 1.618 is often viewed as the measure of perfection. It’s amazingly aesthetically pleasing to the eye and it’s used in graphic design a lot (called the rule of thirds).
Phi is so ingrained into everything around us that many scientists believe it holds the key to unlocking the greatest prize that physics has to offer; the grand unified theory. I tend to agree.
What Stock is This?
The stock is one of my favorites; Visa. In my graph, the first two spirals track actual rises in the stock. The third spiral predicts the next rise and fall. I also keep a spreadsheet that tracks the weekly compound growth of both Visa and Mastercard and I’ve put the Visa numbers in the graph for additional reference.
Are You Serious?
[Dramatic pause] … Hell no.
First, let me say there are a number of REAL technical indicators including historical performance, investor sentiment, and corporate fundamentals that make these predicted numbers very possible.
But I’d never make a trade decision based on my pretty little spirals. Or anyone else’s. Here’s why …
There’s a fundamental PROBLEM with any system that tries to predict the future. And it’s called the Heisenberg Principle. Which basically states that if you make a prediction, and then act on that information, your actions will have an impact that changes the future. Thus, whatever you predicted won’t happen.
I’m talking about this because I see a lot of advertisements for amazing stock trading “systems” out there. Don’t get duped.
I’m sure some of them have some success here and there. But according to the laws of physics, the more people that use a successful “beat the market” system, the less chance it has of success. The more people that game a future prediction, the more impact there is that will void that prediction.
Of course, there’s always the theory of self-fulfilling phrophecy.
Now there’s a system.