What is the order parameter?

In the finance, the order parameter concerns a critical value of variables in a complex interplay between investors and financial markets on which there is a fundamental change in the stock market phase. Order parameters are part of financial equations that are used in eConophysics, a discipline that applies formulas and methods traditionally used in the field of physics to study financial markets. Econophysicists assumed that the stock market had two phases, one in which the purchase and sale of shares is roughly in balance and the other, which prevails either purchase or sale. The order parameter denoting the shift from one phase to the other is the volume imbalance. Investors can predict phase transitions on the market by monitoring transaction data, calculating the volume imbalance and by involving this value to the equation.

Scientists have long tried to see how items of interest change over time. Found that seemingly chaotic systems while they seem to bet random, they behave in predictable, albeit irregular ways, due to the present stimuli or conditions. This study field, called non -linear dynamics, analyzes the interaction between different different factors in the system in an effort to recognize the basic hidden order. The financial market, which includes a large number of people who interact in different circumstances, corresponds to the non -linear dynamic model. In econophysics, mathematical equations can predict various variables such as momentum, volume changes, acceleration and investors' psyche, using order parameters to eventually prognosis of price changes.

In physics, the order parameter indicates the order level in the system. The more variable deviates from the order parameter, the greater the probability of the phase transition. For example, when a transaction initiated by the buyer -initiated buyer initiated by the seller initiated by a critical threshold, market transitions from balance to a high demand scenario that will increase prices up. Vice versaYE transactions initiated by the seller prevail before the sale initiated by the buyer, deviating from the order parameter, shift from equilibrium to low demand reduces the price of mines. Volume changes are before price changes, which theoretically allows investors to take wise decisions regarding the input and output strategy.

Order parameters can reflect independent variables or a combination of variables. For example, in weather forecast equations, an order parameter consisting of temperature changes can represent the combined effects of changing air streams, exposure to the sun and clouds. Similarly, when the substance passes from one phase to the other, the order parameter is the particle density. Although the temperature, wind and movement affect whether the water is melting the water evaporates, the particle density determines the phase. Similarly, sentiment or investor demand when using as a parameter of the order encapsulates all concerns, beliefs, motifs, consumers' perception and general psychology of the business population.