Maniflood Blog
Forex, explained by the maths
Why Forex Charts Look Drunk — The Random Walk
The random walk explains why most short-term currency moves are noise, and why one good year proves almost nothing about a strategy.
Fat Tails — Why "1-in-a-Million" Crashes Happen on a Tuesday
Markets have fatter tails than the bell curve predicts. Understanding kurtosis is the difference between surviving a shock and being wiped out by one.
Mean Reversion — The Elastic Band of the Markets
Some prices behave like an elastic band, pulled back toward a fair value. The Ornstein-Uhlenbeck model and the half-life tell you how strong that pull is.
Volatility Clustering — Why Market Storms Travel in Packs
Calm follows calm and chaos follows chaos. GARCH models capture the market's memory for volatility, even when returns themselves look unpredictable.
The Sharpe Ratio — And Why It Lies to You
The Sharpe ratio is the industry's favourite scorecard, but test enough strategies and one looks brilliant by luck alone. Meet the deflated Sharpe ratio.
Overfitting — The #1 Way Backtests Fool You
A beautiful backtest is the easiest thing in the world to produce and the most dangerous. The probability of backtest overfitting (PBO) and the defences that work.
The Topology of Markets — The Hidden Shape of Price
Topological data analysis looks at the shape of market data — loops, holes and regimes — revealing structure that ordinary indicators miss entirely.
Entropy — The Hard Limit on Predicting Any Market
Information theory sets a ceiling on how predictable a market can be. Shannon entropy explains why exploiting an edge tends to erase it.
Correlation vs Cointegration — Don't Get Fooled
Correlation is fleeting and often spurious; cointegration is a genuine long-run relationship you can trade. Knowing the difference is the heart of pairs trading.
Itô's Lemma & Volatility Drag — The Hidden Cost of Randomness
Volatility quietly eats compounded returns. Itô's lemma reveals the half-sigma-squared term that makes a volatile, break-even bet lose money over time.
Educational content only — NOT financial advice and not a recommendation to trade. CFDs and spread bets are high-risk leveraged products; the majority of retail investor accounts lose money. Maniflood does not hold client money or trade on anyone's behalf.