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Ocean Theory is called that because I was looking at the ocean and its waves when I first began to think about the essential underpinnings of the theory. It arose, most fundamentally, because of an equation that I thought I'd discovered, which I called The Ocean Equation.
What I didn't realize at the time is that a number of very bright mathematicians and statisticians had preceded me, and had done so in a more general way, in the mathematics that describes the random 3-D movement of molecules that we call Brownian Motion.
What really interested me about The Ocean Equation was that the movement of prices in markets—though composed of billions of different decisions to buy or sell based on various motivations—and whether the market was of stocks, soybeans, silver or whatever—was nevertheless following the same mathematical pattern underneath.
That astounded me. The pattern is that prices on average are changing with the square root of time. This holds true, by the way, for all time frames from minutes to years and beyond. It's a very general pattern. Later I found out that even the movements of molecules were following this same general equation/pattern/order.
That fascinated me. So I began spending some time thinking about the implications of that, and gradually beginning to build sets of equations and algorithms derived from it, to attempt to illuminate this mysterious order hidden underneath the mercurial movements of markets.
—jim sloman
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