Educational: Quick, What are Fractals?
You've probably heard before "The markets are fractal" and you probably was not sure what that meant
What is a fractal?
Fractals are complex geometric patterns that exhibit self-similarity at different scales. In other words, they are intricate shapes that contain smaller copies of themselves, regardless of the level of magnification. Fractal in financial markets are often mistaken for Williams fractal indicator. They are not the same .
Fractals have applications in various fields, including mathematics, physics, computer graphics, and art. They have also been used to model and study complex natural phenomena, such as the branching patterns of trees, the distribution of galaxies, the structure of coastlines, and even the behavior of financial markets.Fractals are utilized in financial markets to illustrate the notion that patterns observed in the market transcend timeframes and remain consistent. In essence, the behavior exhibited on a 1-minute chart is also on a daily chart.
Below is a good example of a fractal pattern at different scales.
Lets bring this back to the financial markets. Without cheating. I want you to go ahead and try to guess which of these charts is a daily chart.
Have your answer ? Okay good. Well as it turns out they are all the same chart at different scales. They are all actually a 1Hr chart of US30. See image below.
Once I removed the scale and price there was no way for you to tell what chart or timeframe you were viewing. In fact I could have provided you with any data plotted as a candlestick and you would not know what data it is. Because the same patterns exist on all timeframes regardless of scale. So the next time someone says. The daily timeframe is more smooth and less choppy, understand that there is "some" truth to that but only in the sense of the daily timeframe is less prone to anomalies such as news events that might cause a sudden spike on the chart but on a long enough timeframe that spike can also occur on the daily timeframe.
Now the next time you hear someone say "The markets are fractal" you will understand.
Note that this is a far more complex topic but this is just a quick summary
What is a fractal?
Fractals are complex geometric patterns that exhibit self-similarity at different scales. In other words, they are intricate shapes that contain smaller copies of themselves, regardless of the level of magnification. Fractal in financial markets are often mistaken for Williams fractal indicator. They are not the same .
Fractals have applications in various fields, including mathematics, physics, computer graphics, and art. They have also been used to model and study complex natural phenomena, such as the branching patterns of trees, the distribution of galaxies, the structure of coastlines, and even the behavior of financial markets.Fractals are utilized in financial markets to illustrate the notion that patterns observed in the market transcend timeframes and remain consistent. In essence, the behavior exhibited on a 1-minute chart is also on a daily chart.
Below is a good example of a fractal pattern at different scales.
Lets bring this back to the financial markets. Without cheating. I want you to go ahead and try to guess which of these charts is a daily chart.
Have your answer ? Okay good. Well as it turns out they are all the same chart at different scales. They are all actually a 1Hr chart of US30. See image below.
Once I removed the scale and price there was no way for you to tell what chart or timeframe you were viewing. In fact I could have provided you with any data plotted as a candlestick and you would not know what data it is. Because the same patterns exist on all timeframes regardless of scale. So the next time someone says. The daily timeframe is more smooth and less choppy, understand that there is "some" truth to that but only in the sense of the daily timeframe is less prone to anomalies such as news events that might cause a sudden spike on the chart but on a long enough timeframe that spike can also occur on the daily timeframe.
Now the next time you hear someone say "The markets are fractal" you will understand.
Note that this is a far more complex topic but this is just a quick summary
C Nicholas Downie
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