Fractal dimension stock market data analysis

Many scientists and mathematicians believe that stock prices move in fractal patterns. An excellent book on this subject is The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot. The FDI can be used as a stock market indicator, and you can use my Fractal Stock Grapher desktop app to plot it.

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If you use TradeStation, you can download my FDI indicator see below. During a strong rally, prices trend sharply, sometimes approaching a one-dimensional straight line. And if we believe that prices should move in a more jagged fractal pattern, we would assume that the almost-straight movement will end at a point which we might be able to predict with a degree of accuracy sufficient to make a good trade.

After trending, prices often trade in a range for a while before embarking upon the next trend. Imagine prices trading in a rectangular pattern, zigzagging back-and-forth over the same points in a two-dimensional planar pattern. And so, the FDI is a method which assigns a number to the line on your chart. The number will be between 1.

The closer prices move in a one-dimensional straight line, the closer the FDI moves to 1. The more closely prices resemble a two-dimensional plane, the closer the FDI moves to 2. A trend causes the FDI to move down, and we can expect the trend to end when the FDI reaches the 1.

The FDI does not tell us if the trend will reverse sharply, or if prices will begin to range. It only tells us that prices should go back to acting like a fractal soon. As the market ranges, the FDI will move up. When the FDI reaches the 1. The FDI does not tell us which way prices will break, only that a break should be coming soon. Here is a daily Apple AAPL chart from June to November The Fractal Dimension Index is the red line at the bottom. Coming into July , Apple was in trading range.

Notice how the FDI moved up to the 1. And so it did. Trend 1 moved upward until the FDI dropped to the 1.

Apple then began ranging again Range 2 until the FDI moved back up to the 1. That signaled another trend, and Trend 3 began. The FDI dropped back toward the 1.

Apple sort of drifted up some more until the short, sharp burst of Trend 3. The FDI hit 1. Apple did not range for long enough between Trends 2 and 3 for the FDI to give an end-of-range signal.

The range ended with a bang and the market trended downward until the FDI approached the 1.

So, the same reading might be used to buy or sell depending upon the direction of the trend. Fractal Dimension Index Indicator for TradeStation n Different stocks, commodities, and markets will make varying extremes on the FDI.

With my indicator, you can set the levels of the blue and purple lines to fit what you are trading. Just look at the extremes from the past, and adjust the lines to fit.

My indicator also has customizable alarms. So, on a DIA chart, for example, you can enter: You can see another FDI example that I did on the weekly gold chart back here.

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If you liked this page, then you will love my book: The General Theory of Day-Trading , which I think will prove to be a watershed in trading history. The data is published daily, so it is an incredible, real-time, economic indicator. It would be very helpful Thanks for your help and your nice work Nicolas.

Fractal Analysis in the Indian Stock Market with Special Reference to CNX Index Returns by Gayathri Mahalingam, M. Selvam :: SSRN

All I am searching for, to no avail, is a program to put on my PC that will generate a weekly and monthly fractal dimension chart for any stock I wish, done the way you and David Nichols generate it.

I guess any such program has to be connected to a large stock database going back enough years to build accurate fractal reads. Do you know of any such thing? I have actually been thinking about this because most trading programs let you download the data from your charts. I could whip something like that together pretty quickly.

Boris Zenchinko, a Russian physicist, has created a fractal index for stocks. Does the basic method differ or is there just one generation formula? Does a Fractalz CUBED FDI chart look similar to that of other software for the same stock?

I gather that the critical trend start and exhaustion levels differ from stock to stock.

Your email address will not be published. Matt Trivisonno's Blog New Book! December 8, at 4: December 8, at 9: Nicolas, All of the Fractal Dimension Index charts I have posted on the site so far use a period of December 8, at 1: Self Similar Idiot says: December 8, at December 10, at 6: Leave a Reply Cancel reply Your email address will not be published.

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