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Are markets fractal?
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Are markets fractal?

  #41 (permalink)
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Are markets fractal?

Are computers "intelligent"? According to the parameters of the Turing test, this can be judged according the (in)ability of human evaluators to discriminate from their outputs whether they're the outputs of humans or of machines.

Have a look at this recent chart, without identifying parameters or labels:

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Is it a daily chart of a commodity future, or a 1-minute chart of a stock index?

Can you tell?

Perhaps it's fair to suggest that at least most markets are at least superficially fractal, most of the time?

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  #42 (permalink)
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Tymbeline View Post
Are markets fractal?

Are computers "intelligent"? According to the parameters of the Turing test, this can be judged according the (in)ability of human evaluators to discriminate from their outputs whether they're the outputs of humans or of machines.

Have a look at this recent chart, without identifying parameters or labels:

Attachment 188127

Is it a daily chart of a commodity future, or a 1-minute chart of a stock index?

Can you tell?

Perhaps it's fair to suggest that at least most markets are at least superficially fractal, most of the time?

Not really. This is no different than showing an extreme close-up of a bug's eyes and asking if it's an insect or a spider. But neither is fractal.

If the market were fractal, then a trend or range on any given bar interval would be echoed by every other bar interval, which of course it isn't. This is largely due to the fact that bar/candle/time intervals are an invention of the trader/observer. They do not exist in the market. Price is a continuous series of ticks, each of which represents a transaction. Whether one views a tick chart -- or a T&S display -- or a yearly chart is irrelevant. All charts are tick charts. The market couldn't care less how traders bundle those ticks.

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  #43 (permalink)
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DbPhoenix View Post
If the market were fractal, then a trend or range on any given bar interval would be echoed by every other bar interval

If that's what you mean by fractal, then I agree with you, DB.

The charting techniques through which we tend to view "the markets" for the purposes of discussions like this are clearly man-made, as indeed are the markets themselves, but I think many would interpret the question "Are markets fractal?" (especially within contexts like this one) as referring to our perceptions of markets through charts?

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Tymbeline View Post
If that's what you mean by fractal, then I agree with you, DB.

The charting techniques through which we tend to view "the markets" for the purposes of discussions like this are clearly man-made, as indeed are the markets themselves, but I think many would interpret the question "Are markets fractal?" (especially within contexts like this one) as referring to our perceptions of markets through charts?

That may be. But then that definition has nothing to do with the accepted definition of "fractal".

If by "fractal" one is referring to the near-infinite number of levels of bar intervals from which we can choose to illustrate tick-bundles, then why hijack the term? More useful for the individual would be an examination of why he cares? For example, if one is a daytrader, an hourly interval isn't going to do much good. He would at least want to look at a 15m interval (or 13 or 17 or 12 or 23). And if that doesn't provide enough opportunities, then he'd most likely want to look at something smaller, something that provides more retracements (or pullbacks) or ranges.

The key questions remain: where am I going to enter? where is my stop -- if any -- going to be? what will I look for to tell me whether I was right or wrong? how far do I expect price to go? how flexible am I going to be in terms of how much it can back up on me before I call a reversal? These questions apply regardless of how one displays his bars or candles and have nothing to do with "fractalness" or lack thereof. Moving past all that and plotting price movement as a line might help to dislodge certain entrenched behaviors and present fresh perspectives on entering and managing trades.

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  #45 (permalink)
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Gonna throw in my 2c

A fractal market, sans chart patterns, would imply identical herd behaviour for different time frame traders/investors.

For example, I think most would agree a balanced market (bracketing) would imply agreement of price at that point in time and a trending market would be participants in search of value.

Markets move in a pattern of balance-trend-balance-trend in one of two modes - a basic market principle.

Now, talking on a general basis, if all market participants in all time frames engage in the same method of auction behaviour, then wouldn't markets move in the same balance-trend-balance-trend mode going from the 1 tick to the 1 day, 1 week or 1 year time frame, hence causing markets to become fractal?

I think looking at it from an auction process and not just a chart and seeing how similar it is, would make this clear - markets are fractal because the auction process of accumulation, discovery and distribution is the same across all participants and timeframes.

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  #46 (permalink)
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I think it may be said that the market is fractal-like... certainly not fractal by the strict definition.

Btw, if you never messed around with the Mandelbrot set, you're missing out. Infinitely complex, you can zoom wherever you like as deep as you like (theoretically, anyway ).

"...the degree to which you think you know, assume you know, or in any way need to know what is going to happen next, is equal to the degree to which you will fail as a trader." - Mark Douglas
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  #47 (permalink)
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Fractal dimension

As many things, fractal nature isn't solely a question of "yes or no", but shows different degrees aka as fractal dimension.

For a primer see: https://en.wikipedia.org/wiki/Fractal_dimension

In June 2010, S&C published "Fractal Dimension as A Market Mode Sensor" by Ehlers and Way (p. 16-20).
They research into the normalized version, the Fractal Dimension Index.

Just to give a graphic impression in NT, a chart for the FDI of the ES 30min during the last days (for extensive
explanations see the primer + Ehlers/Way):

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fyi the FDI versions for several platforms: TRADERS’ TIPS - June 2010

Happy testing

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  #48 (permalink)
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Kind of

Market show Self-Similarity properties.

From wikipedia:
"In mathematics, a self-similar object is exactly or approximately similar to a part of itself (i.e. the whole has the same shape as one or more of the parts). Many objects in the real world, such as coastlines, are statistically self-similar: parts of them show the same statistical properties at many scales.[2] Self-similarity is a typical property of fractals."

Fractals too, show this kind of property, so we can say that in some way markets are fractals.

Look at this image
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Trends, composed of smaller trends, composed of smaller trends, etc..
From the super small ones that last a second, to the ones that last a century.


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