How We Quantify 'Panic': The Market Memory Algorithm

Defining "Panic"

At Market Memory, we don't use the word "panic" lightly. For an event to qualify as a Justified Panic or Unjustified Panic in our system, it must meet specific criteria.

We aren't just looking for red days. We are looking for dislocations.

The Metrics

Our algorithm scores every sell-off based on three primary vectors:

1. Velocity (The "Speed" of the Drop)

A slow bleed of -20% over a year is painful, but it's not panic. A -20% drop in two days? That's panic. We measure the standard deviation of the rate of change to identify outliers.

2. Volume Anomaly

Panic is noisy. We look for volume signatures that are >3 standard deviations above the mean. This tells us that the emotional intensity of the market has reached a boiling point.

3. Fundamental Detachment

This is the "Secret Sauce." We compare the price drop to the actual news.

• Scenario A: Stock drops 30% because earnings missed by 50%. (Justified)
• Scenario B: Stock drops 30% because of a vague regulatory rumor. (Unjustified)

The "Hindsight Engine"

Our core feature, the Hindsight Engine, takes these metrics and overlays them with historical outcome data. We ask: "If you bought this exact setup in the past, what was your probability of profit?"

By quantifying fear, we turn emotion into data. And data is the only thing that beats panic.