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The Science Behind The Signal: Markets & The 2nd Law Of Thermodynamics
Markets follow the 2nd Law of Thermodynamics which states that the entropy of a closed system never decreases because a closed system tends toward maximum entropy, or equilibrium. Entropy is defined as uncertainty. Uncertainty in the market means low participation rates which mean less volume and less volatility resulting in what traders refer to as a counter-trending environment. While markets are definitely not closed systems they behave like they are when there is no new incoming information. This means that without new actionable information to motivate participants to trade that market will move toward a ... (full story)
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