[jonbig04]

Here at TL it seems to me that most of us rely on PA to make our trading decisions in one way or the other. Something I am curious about is whether you think the market is fractal in its patterns and general behavior.

I have always been taught that it was. However when someone asks me if the economy, or the S&P has more upside or more downside I always tell them I simply don't know. I tell them that I'm a speculator, and there are too many factors going into whether or not the S&P has bottomed for me to make a sound guess. Of course if the market is truly fractal, I would be able to perform the same analysis (right or wrong hehe) on the macro picture of the S&P as I during the day or week.

But I can't. DB mentioned in another thread that he didn't think the market was fractal. Is the market fractal? Can we perform the same analysis on 60 minutes of data as we can for 60 years of data?

Just looking for thoughts and opinions.

[HAL9000]

Jon,

I believe it is fractal,

but I don't think that it is right to assume that you can "predict" the macro derived from the micro picture.
If at all, you can "predict" the better choice for the micro picture from the macro picture.

Basically the fractal thing tells me, that you should be able to use systems in their own context.

Another thought of mine is about drift and noise. At some point, if you go in smaller and smaller time frames, drift should disappear while noise should stay. While noise might just end up only in commissions, drift should lead to results.
But what about playing drift using noise.

And this all in a fractal context.

I guess this was all academic.
Anyway, if you find a good system that uses drift and noise at the same time,
please tell me, I am searching it.

[HAL9000]

Am I confusing myself?

Reading my answer, I think I have to say, I don't believe that markets are fractal.

I believe that markets are like music.

Lets say you have a wave with 440 Hz (Drift).
Then you overlay this wave with a quicker wave (Noise).
And so on. (More noise)

(Sorry have to search for the correct English phrases tomorrow.
But I think you understand).

I believe in drift and noise.

[sep34]

johnbig04,

Just a suggestion...You might want to provide a clear definition of what your definition of Fractal is before this thread gets going. You might get better more accurate to the point response.

FWIW I used to think that there was market noise, however that has changed now. I no longer believe in market noise. I only believe that there is price action that I understand and price action that I dont understand. IMO this(market noise) is one of those things that gets shoved into our heads before we have a chance to make a independent determination if such exists.

[jonbig04]

By fractal I mean the patterns and behaviors of the market are equally relevant, and traded the same, regardless of the time frame...more or less.

[HAL9000]

However what is noise.

I once studied Browneen motion in a different context,
but its still in my mind.

So here is my problem.
If I assume that markets are fractal, and this should imply that I am able to use
one setup on every time frame (context), I think that there should be no drift (trend).
Or somehow something (the indicators) have to adjust for the drift or tolerate it or ...
I don't know.

But if there is a large drift on a higher time frame, you should get large errors in lower ones (if you go both sides, i.e. reversal strategy).
So I think, that it is possible, that the market just looks like it is fractal over time,
because they don't like to go to zero and they don't like to go to the sky.


Somehow its all academic, the practical problem is (at least for me), what stop will keep me out of noise while riding the drift. And, how do I recognize, when the drift changes direction. I don't have to recognize it in all frames, just within the one I like to trade,
based on time, volume, ticks, range, whatsoever.

Today I found out one mistake I made on my loosing days, too tight stops, simply placed within noise. Simple problem. Deadly result.

Hal

[sep34]

Originally Posted by jonbig04 »

By fractal I mean the patterns and behaviors of the market are equally relevant, and traded the same, regardless of the time frame...more or less.

Generally speaking, I use the same methods that I use on the 1, 2, & 3min to trade intraday, on 15min,60min etc.., Daily, Weekly interval--It makes no difference for me.

[BlowFish]

There was a thread that discussed this not so long ago. People agreed to disagree on the whole.

As for a definition how about "An irregular geometric object that is self-similar to its substructure at any level of magnification", there are various definitions knocking around but they boil down to essentially the same thing.

For practical purposes I think they are close enough though current thinking favours multifractals if you are actually trying to model them (financial time series).

I have a couple of 'conceptual models' when I am thinking about time series data. One is kind of fractal. The other is more sampling (so kinda signal processing orientated).

If it helps you to think about things its useful if it doesn't its not. Of course if you are trying to model data your requirements might be more stringent.