Modern physics, particularly quantum and relativistic theories, has replaced Newtonian certainty with conceptual frameworks that embrace incomplete information as a fundamental element. Similarly, the analysis of modern financial markets, especially collective and technical analysis, must operate under conditions of epistemic uncertainty, not merely ontological randomness.

This is the kind of article that will always grow in the direction of entropy.

1. Incomplete Information, Not Ontological Randomness Link to heading

In quantum physics and in financial market analysis, probability is often misunderstood as reflecting a fundamentally random world. In reality, it is a tool for managing incomplete information.

In both physics and economics, modeling is not an ontological verdict on reality, but rather a logical inference between what we know and what we can estimate.

  • The uncertainty principle does not imply that nature is random but that we cannot access all information simultaneously.

  • Prices and trends are not necessarily random, but information about them is incomplete—informational asymmetry, delayed reactions, anticipation.

An actuary does not have access to all decision vectors of the market, just as a physicist cannot know both the position and momentum of a particle simultaneously.

2. Superposition and Market Scenarios Link to heading

  • In quantum mechanics, a system is in a superposition of states until measurement.
  • In investing, a market can be seen as having simultaneous scenarios: rising, falling, stagnating.
  • Market events (news, monetary policy decisions) act as “measurements” collapsing uncertainty into an outcome.

3. Relativity of Perspective Link to heading

  • Relativity theory teaches us that there should be no privileged observer.
  • In markets, each investor has a personal perspective, defined by their time horizon, risk tolerance, and investment style. Legal systems forbid any privilege.

A “sell” signal for an intraday trader may be a “buy the dip” signal for a long-term investor.

4. Reflexivity and the Observer Effect Link to heading

  • In quantum mechanics, simply observing a system—such as measuring a particle’s position or momentum—inevitably alters it.
  • In markets, investor models and sentiment alter market reality.

If enough investors believe in a technical support level, it becomes real through collective behavior.

This is not a false positive: it is a feedback loop between perception and reality. In markets, expectations shape prices; in physics, measurements affect the system’s state.

5. Aggregating Behavior: Waves, Not Particles Link to heading

  • Wave-particle duality suggests that particles can form interference patterns, not just mechanical collisions.
  • In collective analysis, individual decisions produce nonlinear collective effects: trends, panic, irrational exuberance.

6. Wave-Particle Duality and Investors’ Dual Character Link to heading

  • Physics: Photons behave as particles or waves, depending on observation.
  • Investments: Investors may act rationally (particles) or emotionally (waves), depending on market context.

7. Leverage and the Principle of Amplification Link to heading

In finance, leverage is a strategy whereby an investor increases their exposure to a position using borrowed funds or derivatives, thereby amplifying both potential gains and losses. This result amplification mirrors constructive interference in quantum physics, where overlapping quantum states may increase the likelihood of a particular observable outcome.

  • In both fields, a small input—equity capital or an act of observation—can produce a disproportionate effect on the result.
  • Leverage requires risk control in an environment of incomplete information—just like an experimentalist adjusting measurement conditions to influence the wave function’s collapse.

If the market is a wave function waiting to collapse, then leverage is a kind of filter that increases the chance of a preferred outcome—but with the risk of systemic instability.

Thus, leverage is not merely a financial tool, but also an expression of sensitivity to initial conditions—a theme common to both paradigms.

8. Financial Options as Insurance Link to heading

Options are financial derivatives that offer the right, but not the obligation, to buy or sell an asset at a preset price. By their nature, they act as insurance against adverse market movements.

  • A put option protects against price drops—like an insurance policy against losses.
  • A call option allows access to potential gains—a form of strategic reserve.

This protection comes at a cost: the option premium, equivalent to an insurance premium.

  • In both cases, you pay to mitigate uncertainty.
  • From an informational standpoint, insurance and options are rational responses to incomplete knowledge of the future.

In quantum mechanics, superposed states correspond to alternative scenarios. An option allows an investor to remain in superposition until a fixed date, when observation (option expiry) occurs. The decision then collapses into “exercise” or “abandon”—behavior analogous to wave function collapse.

Options as insurance are a way of navigating uncertainty without relinquishing control, delaying decision until relevant information emerges.

9. Short Selling – Invisible Compensation Link to heading

In quantum physics, a particle can exist in a superposition of states until observed. Similarly, a short seller operates in a structured uncertainty context, where incomplete information is compensated through invisible mechanisms.

Short selling means:

  • borrowing an asset (e.g., a stock),
  • selling it on the market at the current price,
  • intending to repurchase it later at a lower price,
  • returning the asset and keeping the difference as profit.

But short selling is not just speculative. It can play a protective role:

  • for example, if you hold a long position in an asset,

  • you may open a short position in a negatively correlated asset (or even the same one),

  • to reduce market risk in a volatile context.

  • In cosmology, dark energy is an invisible component that acts to balance the universe’s expansion, though not directly observable.

  • Similarly, short selling is invisible in a net position but can compensate and stabilize an investor’s portfolio.

  • It is an invisible yet essential force in maintaining financial balance in a universe of incomplete information.

Thus, while long acquisitions build visible exposure, short positions act as a “background energy”, invisible yet structural, essential for coherence.

In a world of perfect information, short selling would be impossible: prices would already reflect all expectations. In reality, uncertainty and delayed reactions create the perfect environment for such strategies.

10. The Three-Filter Paradox – More Information ≠ More Opacity Link to heading

A famous light physics experiment shows this paradox:

  • Two crossed polarizing filters (one vertical, one horizontal) allow no photons to pass.
  • But adding a third filter between them at an oblique angle (e.g., 45°) allows some light to pass!

This seemingly absurd behavior has a quantum explanation: the photon’s state is gradually projected, and the intermediate filter enables transition between two incompatible states.

  • In markets, seemingly contradictory or intermediate information—like a short position between two long ones—can facilitate understanding or rebalance a portfolio.
  • Sometimes, introducing an intermediate instrument—a form of insurance, a derivative position, indirect hedging—increases transparency and enables flow, just like light.
  • Short selling does not block investment, but creates an intermediate channel that helps capital circulate and markets correct themselves.

In the presence of incomplete information, sometimes more filters lead to more clarity, not more opacity.

This analogy is especially relevant in modern markets, where:

  • Financial derivatives—options, futures, CDS, etc.—are used not just for speculation but for hedging and informational reconstruction.
  • The volume traded in derivatives far exceeds that of the underlying assets. For instance, the notional value of options or swaps is often in the trillions, well beyond the value of the underlying assets.

This reflects a quantum reality: symbolic and projection structures (intermediate filters) come to define financial reality more than the “real” asset itself.

The market no longer merely reflects the underlying asset but rather the structure of opinions, hedging, and expectations built around it—just like light no longer follows a direct path but one shaped by multiple filters.

11. Entropy – The Measure of Uncertainty and Dispersion Link to heading

In thermodynamics and information theory, entropy measures a system’s level of disorder or uncertainty.

In financial markets, similar concepts describe:

  • the probability distribution of future prices,
  • the diversity of possible scenarios,
  • volatility and lack of consensus among investors.

The flatter and more widespread a probability distribution, the higher the entropy—and the deeper the uncertainty.

Just as thermodynamic entropy measures molecular disorder, informational entropy measures the uncertainty of market forecasts.

Modern models use entropy to:

  • calibrate robust portfolios—e.g., maximum entropy portfolios,
  • select estimation models with minimal bias (e.g., entropic priors in Bayesian inference),
  • understand the implied probability distribution from option prices.

Entropy is not chaos, but a measure of how much we don’t know.

12. Angular Momentum: Cyclicality, Rotation, and Stability Link to heading

In quantum physics, angular momentum is a conserved quantity that describes the rotation of a system and its symmetry around a point. It is associated with rotational invariance — a fundamental property of the laws of physics.

In financial markets, angular momentum can be observed in:

  • Sector cyclicality — the rotation of capital across industries (technology, energy, healthcare, etc.).
  • Trend persistence — once initiated, a trend is sustained by the inertia of collective decisions, akin to the conservation of angular momentum.
  • Rotational strategies — portfolios that move systematically across asset classes or geographic regions.

Just as a physical system conserves angular momentum in the absence of external forces, markets tend to maintain the direction of movement when information is coherent and the investor structure remains stable.

A telling analogy comes from ballistics:
A spinning bullet (spin-stabilized) reaches its target more accurately because rotation stabilizes its trajectory.
Similarly, the rotation of capital and investor sentiment stabilizes a trend, dampening short-term volatility.

Ordered rotation not only propagates the energy of motion — it also stabilizes it against minor perturbations.

At the behavioral level:

  • Investors exhibit their own “angular momentum” — a tendency to persist in an investment style, shaped by experience, incentives, and context.
  • Markets don’t always revert to equilibrium in a linear way; they may follow spiral-like trajectories, governed by the conservation of this collective momentum.

In a financial universe of incomplete information, cyclical symmetries and rotations become anchors of stability and coherence.
Like the spin of an electron, the invisible momentum of the market is what gives it shape and resilience.

Conclusion Link to heading

Both modern physics and modern market analysis operate under the constraint of incomplete information. The goal is not exact prediction, but coherent modeling of partial reality. From this perspective, technical and collective analysis become not just financial tools, but epistemological instruments for operating in an uncertain world.