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Fractal Market Analysis
"Fractal market analysis" is a pioneering approach to the study of financial markets, using chaos and quantum theories to study and characterize the inherent predictability of financial markets.

Over the last 40 years, a language has sprung up to address what is happening in seemingly random natural systems -- such as the weather, and financial markets -- in order to study what may be predictable in such systems. This is chaos theory, which is trying to understand the order hidden within seemingly random chaos.

Fractal market analysis discovers and characterizes the order hidden within seemingly random financial markets, and determines the probability of future events.

A fractal pattern is a recurring pattern in a chaotic environment. A defining characteristic of a fractal pattern is that it is self-similar in all time-frames; that is, the smaller components have the same basic shape and pattern as the larger components. Financial markets are fractal in this way, as it is impossible to look at an unlabeled price chart and determine whether it is an hourly, monthly, or even a 5 minute chart of the trading action. They all look the same. Markets are fractal.

I've spent many years studying and researching the way that financial markets actually behave, using chaos theory and empirical observation in real-time of unfolding fractal patterns to characterize the way they move. I also have a proprietary fractal projection method which tells me in surprising detail how a market fractal pattern is going to develop.

The main advantage of knowing these fractal patterns and projections is they identify specific critical balance points where the potential energy may resolve in one direction or another. I can identify ahead of time where these points are, so I can know as early as possible where a market is going to go.

Interestingly, there is not much published in the field of fractal market analysis -- at least nothing of any real value. There are dispersed pockets of people working on these ideas -- most of whom I know -- but few publish their work, primarily because of the significant edge it is providing in financial markets.

I continue to be surprised about how there is still such a wide-open frontier in market analysis, in spite of the trillions of dollars, and the best and brightest minds around the globe devoted to the markets. It's my belief that 99.999% of all market participants are approaching the markets the wrong way and are not using the right set of analytical tools.

There is no direct relationship between the inputs into a market -- such as earnings, economic reports, liquidity, etc. -- and the output, which is the price. There is no proportional relationship. The markets have to be studied as chaotic, non-linear systems, yet almost nobody studies them in this way.

But over the next 20 years this will certainly change. Fractal analysis is pushing into the still-unexplored frontier of market thought, but it's my guess that in 20 years just about every market follower will be well-versed in many of these ideas.


-- David Nichols

 
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