Fractals on Forex - what you need to know about them

You 're unlikely to find any newcomer in the Forex market who wouldn 't know what a fractal is. And outside the market a lot of people heard about such a concept. Fractals have been known for almost a century, are well studied and have numerous applications in life. At the heart of this phenomenon is a very simple idea: infinite in beauty and variety many figures can be obtained from relatively simple designs using only two operations - copying and scaling. 


Fractals have been used in financial markets for quite a long time - even in classic trade strategies there are references to them. For example, Bill Williams 'well-known trade strategy Profitunity uses fractals as one element of the system. Today this indicator is the hero of our review: we will learn the history of its appearance, we will see what fractals are, and in the topic on the forum you will be able to get acquainted with more than a hundred varieties of this indicator) 



What is a fractal? 



The concept of "fractal" has no strict definition. Therefore, this word is not a mathematical term. This is commonly referred to as a geometric shape that satisfies one or more of the following properties: 


- Has a complex structure at any magnification; 


- Is (approximate) self-similar; 


- Has a fractional hausdorph (fractal) dimension that is larger than topological; 


- Can be built by recursive procedures. 


Fractal structure of the market 



All this ode to fractals would be in vain if it weren 't for the fractal nature of financial markets. Yes, at last we have reached the discussion of the very issue for which I wrote this article. 


So, there are many ways in which traders can analyze financial markets to build their trading strategies. Among the various analysis and prediction tools, fractal analysis stands a little aside. It is a separate versatile and interesting theory for discussion and study. The first impression speaks of the simplicity of the topic, but the coppers are deeper, and many hidden nuances will be visible. 


Understanding fractals is key to seeing hidden market information. And it is it that is one of the key factors in the market success of the speculator and the guarantee of a large stable profit. 


On October 14, 2010, Benoit Mandelbrot died - a man who in many ways changed our perception of the subjects around us and enriched our language with the word "fractal." 


As you know, it is thanks to Mandelbrot that we know that fractals surround us everywhere. Some of them continuously change like moving clouds or flames, while others - like shorelines, trees or our vascular systems - retain a structure acquired during evolution. At the same time, the real range of scales where fractals are observed extends from the distances between molecules in polymers to the distance between galaxy clusters in the universe. The richest collection of such objects is collected in Mandelbrot 's famous book "Fractal Geometry of Nature." 


The most important class of natural fractals are chaotic time series, or time-ordered observations of the characteristics of various natural, social, and technological processes. Among them are both traditional (geophysical, economic, medical) and those that have become known relatively recently (daily fluctuations in crime or accident rates in the region, changes in the number of screenings of certain sites on the Internet, etc.). These series are usually generated by complex nonlinear systems that have a wide variety of nature. However, in all, the nature of behavior is repeated on different scales. Their most popular representatives are the financial time series (primarily share prices and exchange rates). 

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