Quote from MAESTRO:
Time and timing plays a central role in the relationships between all living things. Peopleâs activities are governed by cycles of time, which when taken together determine individual and social behavior. These cycles, otherwise known as actions or behaviors, require a level of skill that can only be acquired after a long period of training before they can become useful, while others seem to develop spontaneously. Why? The answer is spontaneous synchronization.
Here is an example. Suppose you are in a hockey arena with thousands of fans. Those fans react to the gameâs flow and shout at will. When a small group of the most active cheering fans start to rhythmically chant something like âGo, Canada, Go!â the whole arena begins to cheer in unison, causing the otherwise unrecognizable noise of cheering to become clearly recognizable to anybody within a mile of the arena. The conversion of the crowdâs noise to a loud and recognizable cheer depends on the timing of the chanting or cheering. While participating in this chanting people within the arena do not even realize that their heart begins beating faster due to their surroundings. The cells in our body are quite literally synchronizing to the external stimuli. The emotional character of the cheer can accelerate or decelerate our heartbeat. We are not aware of the process, but the cells themselves manage to change coherently, almost in unison.
Just a few milliseconds seconds after a personâs favorite team scores the crowd starts to cheer loudly. Initially the cheer may be incoherent, but the wish to cheer and deliver a message of appreciation to the home team transforms the otherwise incoherent scream into a perfectly synchronized chant âGo, Canada, Go!â despite the different location of individuals inside the arena. This example illustrates Spontaneous Synchronization, one of the most captivating cooperative phenomena in nature. Spontaneous Synchronization is observed in biological, chemical, physical, and relevant to this discussion, social systems such as stock markets.
The relevance of synchronization in the Stock Market has been studied for decades if not centuries, but until now it has not been fully understood.
To further illustrate the concept consider the behavior of fireflies. To facilitate courtship, fireflies flash their hind end while other fireflies seem to respond and ultimately synchronize flashing. Similarly, in the stock market Spontaneous Synchronization occurs resulting in dramatic price fluctuations that cannot be explained by other rational market models.
Spontaneous Synchronization observed in complex systems can suddenly change the systemâs behavior from a disordered state to an ordered one. These sudden changes are known as phase transitions and occur in a whole range of systems â think, for example, of a group of chaotically moving birds suddenly coming together to form a "V" shape, or locusts simultaneously alighting on a field of valuable crops. Fish spontaneously assemble large schools and small birds form swarms to protect themselves from predators. The behavior of these kinds of systems is remarkably predictive of the behavior of stock market participants.
Understanding the mathematics of how, and under what circumstances, entities can synchronize provided us with a starting point for designing our way of looking at markets.
Just remember, I am in Toronto, so anything anti-leafs could get me in trouble 