Re: МТ4 Trading Systems: WORKSTATION

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FRACTALS MANDELBROT
We all live in a reality of their ideas. The market is a mirror, reflecting our own ideas. Everyone connected with the market, never deal with reality, but always with their ideas. Sometimes the views take on a mass character, and we're talking about trends, support lines or graphic shapes. Analysts often note that the "profit growth led to the purchase of shares" and "oil fell on sales investors." But in reality none of us knows what's going on. We all use only a model, a simplified version, a copy of the market. Our success depends solely on how our copy similar to the original.
The beginning of the 21st century has seriously shaken all modern financial theory. The bankruptcy of large investment corporations, financial crisis — all have questioned the models used by analysts and traders around the world. Investment advisors or shrug, or stubbornly cling to outdated theories, but the reality can not be ignored – the markets are not described by the theory of random walks, Gaussian curve, the Markowitz model and the formula of Black-Scholes.
Copy turned out to be a crude forgery. This is why the interest in alternative theories describing the behavior of the financial market began to grow rapidly. One of these theories is fractal geometry. This theory is not new and is actively used in different areas. FRACTAL GEOMETRY The term "fractals" traders traditionally connected with the name of bill Williams. "Williams fractals" know all and they even included in the list of known indicators MetaTrader 4 platform. But few know the name of the author of this concept is Benoit Mandelbrot, the famous mathematician, Creator of fractal geometry. So, what is a fractal?
A fractal is a shape or "structure", which has the property to samopovtoreniyu at different scales But what it gives us to understand financial markets?
Observation 1. Description of the market using fractals
As it turned out, the market behavior can be described using fractals. The basic graphic element of the market is a straight line directed from top to bottom or bottom to top. Every trader is well understood – the price either increases, or decreases, this process occurs in time. Even if we take the price movement within one minute, we'll still get the line that connects the opening price and the closing price. Generator for the price movement is another common structure, a well-known trader, – "impulse-correction-impulse. Generators on the market can be infinite, and points of fracture can be not two. What kind of information can give the trader these figures?
If you look at the price movement of a particular tool, you can see that the structure of the generator repeats itself at all time scales tool Going deeper and deeper, we get up to the minute, and then tick charts, which again and again will manifest the underlying fractal. Tellingly, the ratio between the lines of the generator will remain fixed for any temporary structure. The angles between the lines of the generator for the minute and the monthly chart will correspond to each other, the ratio of their longest as well. This surprising discovery gives us a whole new perspective on the usual price movement. Of course, this understanding is simplistic and, according to Mandelbrot, "a caricature". It serves us to describe the General principle of structure of the price movement. Real market the generator can be much more difficult.
In modeling market behavior, Mandelbrot uses more complex "multifractal" model, which uses three dimensions and the so-called "fractal cube". On it we will not dwell. Instead, consider two other observations of fractal geometry, which are easier to understand and give the trader something to think about.
Observation 2. The market has a memory
Extensive studies of the cotton market led Benoit Mandelbrot to the conclusion that periods of high volatility or "turbulence" tend to gather in "clusters".
What is the "price cluster"? I'm sure you've guessed that this "trend". For us as traders, it is definitely good news. While there are trends, the work of a trader will be well paid.
Observation 3. The Effect Of "Noah"
And finally, the third observation by Mandelbrot is the so-called effect of "Noah." In the old Testament we know that the great flood began suddenly, and the destructive power it was very large. The effect of "Noah" is a metaphor describing market reversals stock exchange panic collapses and take-offs. They never occur smoothly, almost always, the market shoots up or falls down with such force that no investor was expecting.
It always causes a panic among the exchange's audience, which is shocked by these price movements. So, in 1987 the Dow Jones dropped 22.6% in one day. After the collapse, blaming a computer program, but Benoit Mandelbrot is another opinion – it isn't in applications, it's in the nature of the market. Namely, the intrinsic market nature leads to such dynamics. This hypothesis is also new and is not consistent with the efficient market hypothesis, according to which the market must vary smoothly and consistently. About this property market, it should be remembered traders, who work without stops, relying on the fact that the market sooner or later return to the opening level of the transaction.
Insights
Summary that makes Mandelbrot, is that: the market is very risky, much riskier than commonly believed. For traders the risk is not a source of danger and potential source of profit. If it is correct to use the knowledge about price movement and to be on the "right" side of the risk, it will be a blessing, not a curse. Studies on the application of fractal models of the market is just beginning, but already it is clear that this area has a great future. It remains only to recognize that we live in an interesting time – the time of the birth of the new financial theories. Perhaps in 10 years, our terminals will be installed at all other indicators.


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