Rtnlblog - What Ants Can Teach Us about the Market, Part III. In the markets traders communicate with each other as ants do, by sampling and copying the actions of other traders around them.
This type of sampling behavior has a more common name: herding. Herding has been identified as a common behavior in markets, responsible for creating trends. Most famously, Robert Prechter of Elliott Wave International, has written extensively on the topic and created a think-tank researching this phenomenon called The Socionomic Foundation. Described as “History’s Hidden Engine”, socionomics posits that large trends in society and the market are driven by social mood. Rtnlblog - What Ants Can Teach Us about the Markets, Part II. Most of the books on complexity theory are fairly dense because they were written by the pioneers of the field themselves.
Recently, some good books on the subject have come out that are more accessible. Among them, the one I recommend is Melanie Mitchell’s Complexity: A Guided Tour*. It is thorough, easy to understand and fun to read. What Ants Can Teach Us about the Markets, Part I. It turns out, a lot.
An ant colony is a great example of a complex adaptive system. Briefly, simple, autonomous ants interact in dynamic ways. Through these interactions, all kinds of interesting phenomena emerge, including efficient identification of food sources, defense and, of course, the ant colony. I’ll talk a lot about ants in this blog.