Saturday, August 24, 2013 11:01:33 PM
Fractals
A fractal is a shape that, when you look at a small part of it, has a similar (but not necessarily identical) appearance to the full shape. Some of the easiest examples to explain are fractals found in nature. Below are pictures of a sea urchin, a type of broccoli, and lightning.
The patterns seen on the intra-day charts (1-minute, 5-minute, 10-minute, etc.) are very similar to the patterns seen on the daily, weekly, monthly, or even quarterly charts. In other words, stock price movements are also fractal. Since the patterns tend to repeat themselves, it can be inferred, with a reasonable degree of accuracy, how stock prices will react to a given set of conditions.
Factals are the basis of the Elliott Wave Theory in which Elliott claimed the market unfolds in similar patterns along all time-frames; five waves up and three waves down. Of the five waves that go up, each wave is again broken into either five or three, alternatively. Each of these waves are again broken in to 5s or 3s.
Since the market moves in a way that mimics a fractal, it is easier to understand and use tools that are used on daily, monthly, and even intra-day charts, such as trend-lines, moving averages, oscillators, etc.
A fractal is a shape that, when you look at a small part of it, has a similar (but not necessarily identical) appearance to the full shape. Some of the easiest examples to explain are fractals found in nature. Below are pictures of a sea urchin, a type of broccoli, and lightning.
The patterns seen on the intra-day charts (1-minute, 5-minute, 10-minute, etc.) are very similar to the patterns seen on the daily, weekly, monthly, or even quarterly charts. In other words, stock price movements are also fractal. Since the patterns tend to repeat themselves, it can be inferred, with a reasonable degree of accuracy, how stock prices will react to a given set of conditions.
Factals are the basis of the Elliott Wave Theory in which Elliott claimed the market unfolds in similar patterns along all time-frames; five waves up and three waves down. Of the five waves that go up, each wave is again broken into either five or three, alternatively. Each of these waves are again broken in to 5s or 3s.
Since the market moves in a way that mimics a fractal, it is easier to understand and use tools that are used on daily, monthly, and even intra-day charts, such as trend-lines, moving averages, oscillators, etc.
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