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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: Technical Analysis Idea||Date: 4/22/2013 11:51 AM|
|Author: FastMike||Number: 421186 of 472006|
"...Suppose like the Oscilloscope and the Spectrum analyzer we need to have a different display..."
The post with links to the Khan Academy was great! Further, I totally agree that another way is needed to view pricing patterns.
I'd like to put my two cents in, if I may. If you want to analyze using statistically self similar ( or 'rhyming') fractal analysis, you'll need to employ the different logarithmic price scaling, other than base 10.
This phenomenon was first noted by a hydraulics engineer, H.E. Hurst, who was studying the very abundant data of Nile River discharge over a very long period of time. In a nutshell, he discovered that the regression to a mean value over time varied according to an exponential factor of 0.5.
Log Price vs. time should not be at all too difficult to plot as most, if not all charts are able to switch to "logarithmic scaling" on the price axis. The problem is that the log scale on the charts which I have access to, as far as I can tell, will only scale to base ten. I wish I knew how to change that on my trading platform.
In order to employ fractal analysis, a scaling dimension is needed. This is not as difficult as it sounds. There's a very simple method called the box counting method. I'm sure that there's software for this. The resulting ratio is nothing more than the change of logarithmic base formula found in any college level algebra textbook. This method gives a good approximation of the 'fractal (Hausdorff) dimension'.
Once you have that dimension, i.e., you'll also have the new logarithmic base! (Which, again, need not be a whole number). Your logarithmic price axis must now be scaled to that base.
I can even think of a few good examples to test it out. One would be to plot dimensionally scaled cumulative money flow into gold over many decades and then 'compare' the similarly scaled price of gold over the same period. Another would be silver and of course, copper. I'll bet that there can be found notable divergences in the scaled price of gold when compared with a properly scaled chart of cumulative money flow just before booms or busts, especially when the cumulative money flow over time is properly scaled.
Ditto for the major indices.
I think that variable logarithmic chart scaling can be accomplished in Excel, but I can't seem to get a hold of a good sized database. I've been looking, though.
As a reference, I'll strongly recommend Paul S. Addison's, Fractals and Chaos. An Illustrated Course. It's a brief overview with examples, and problems which can be solved with pencil, paper, straight edge and compass and a calculator. It's less than 250 pages and available in paperback.
Just a thought. I'm of the opinion that Fractal Analysis is not the holy grail of analysis, but it's 'along the same lines' of looking at price vs. time charts in a different way.
Anyway, I'm way over due for my morning walk along the (still not replaced) boardwalk.
Your shoreline Fool,
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