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Frequently Asked Questions
You talk a lot about your fractal dimension indicator. What is that?
Can you tell me how you derive your fractal projections?
Can you recommend books on fractal market analysis?
Do you make specific recommendations in this service?
 
You talk a lot about your fractal dimension indicator. What is that?
The term "fractal dimension" is quite imposing, but it's actually a pretty simple idea. This indicator measures whether a chart more resembles a one-dimensional line, or a 2-dimensional plane. That's it.

On the chart, the actual number shown represents the measured dimension between 1 (a line) and 2 (a plane). A fractal dimension reading on the chart of 55 is equivalent to a fractional dimension of 1.55. A reading of 30 is 1.30, and so on.

Below is an explanation written by a brilliant mathematician and thinker named Kieran Kelly, who discusses fractal dimension as part of his larger work on chaos theory. This will give a good sense of the background, and right below this explanation you'll find more on how I use this indicator in practice.

 
Fractional Dimension
by Kieran D. Kelly (copyright 2004)


Classical Science is dominated by linearity, which represents smooth continuous change. Graphically, smooth continuous change can be represented by smooth straight lines and smooth continuous curves. The moon's orbit is elliptical, and its motion traces out a smooth continuous curve.

The real-world however, is dominated by non-linearity, which represents abrupt, discrete change. A good example of a non-linear system graphically displayed is the stock market. The movements of an index representing a stock market are patently devoid of smooth continuous curves. Changes in the stock market occur abruptly, and these sudden changes are represented by the irregular motions and sudden reversals in a distinctly spiky chart.

The dimension of a smooth regular curved or straight line is 1. Similarly, the dimension of a smooth regular curved or flat surface is 2. However, the question arises: what dimension should be assigned to objects that are not smooth and regular, but rough and irregular? The motion of an irregular spiky index chart is certainly not two-dimensional, but nor is it simply one-dimensional. The stock index visits many more points on a flat surface than would a smooth curved or straight line.

The idea of a fractional dimension was first shown to have a sound mathematical basis back in 1919 by the German mathematician Felix Hausdorff. Hausdorff used his fractional dimension to measure the amount of space occupied by objects. The reason for its development is not important here; what is important however, is that this same fractal dimension can be used as a measure of the degree of roughness or the degree of irregularity of any one-dimensional, two-dimensional, or three-dimensional object.

Thus, a line with a dimension of 1.0 is a smooth straight or curved line. However a line with a dimension of 1.53 will have a rough jagged edge. The higher this dimension goes (while remaining within whole dimensional limits) the more irregular the line becomes. A line with a dimension of 1.99 is so irregular that its movement covers almost the entire surface and it consequently appears to be moving in a completely random fashion. If the dimension reaches 2.0, the line is no longer a line, but has become a smooth continuous surface.

This fractal dimension thus measures the amount of non-linearity in the system, from total self-organized linearity to totally unorganized random chaos. This measure can therefore effectively determine the degree of randomness in a system.

 
Practically speaking, the most helpful thing about the fractal dimension is it gives us some idea what a chart is going to do next. This comes from the key observation that markets move in a steady rhythm between trend and congestion.

Understanding and watching the progression of this rhythm, using the fractal dimension to quantify it, can give us a good idea what a market is likely to do next.
If a market has been in a long period of congestion -- with a high reading on the fractal dimension -- then we can assume that the next major move will be a trend. We can also use the fractal dimension to recognize when the market is "self-organizing" itself into a trend, which is the way a market evolves and adapts to new energy (money) coming into or out of the system. When the fractal dimension moves from high levels down through 55, we have a good idea that a trend is starting, and that it will likely continue down towards the 30 area, where trends tend to lose energy and stop.

Conversely, when a trend has reached a fractal dimension reading of 30, we have a pretty good idea that the trend has run its course, and a consolidation or retracement is now about to unfold. The fractal dimension readings then move up during congestion periods.

Of course, there are always exceptions and outliers, but those can be cataloged too. A financial market always needs to be approached with the mindset that we can never know exactly what it will do, but we can have a pretty good idea about how it will adapt and evolve, greatly increasing the likelihood of success.
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Can you tell me how you derive your fractal projections?
  Well, I'm sorry, but I'm not going to divulge my exact methods for generating precise targets for any financial market. This work has taken me many years to characterize, and it now provides a significant trading edge in all financial markets.

I will say that these projection techniques work in all markets, in all time-frames. I am cataloging a "universal market law" which applies to anything that trades. When I set out to study the markets, I have only been interested in traits that are universal in this way, and not specific to just one market like the S&P 500 Index or soybeans. If it's truly valuable, then it should work in all markets in all time-frames. Otherwise the indicator or method will let you down right at the moment when you need it most, when your position is under the most stress.
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Can you recommend books on fractal market analysis?
Honestly, I have not found anything published that can really help you make money in financial markets. When it comes to fractal market analysis, you are really on your own, as anything that is valuable is closely guarded. I've decided to share some of my own research, as I've "grown up" in this industry via the publishing side, and I’m used to writing a daily email after my years of writing the Morning Briefing for 21st Century Alert, which was a publishing company I helped build from 1998 to 2005. With the Fractal Market Report, I am now out on my own, publishing my own research product for a smaller, more dedicated group of traders and investors who are really seeking to understand the way financial markets actually work.
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Do you make specific recommendations in this service?
  Yes, I do. I provide specific targets and strategies, as well as specific entries and stops. But as with anything, the more you put into it, the more you will get out of it. In markets, you cannot count on anybody to "do the thinking" for you. There is no substitute for taking personal responsibility for your own trading, and your own actions. My services can only be a reference point for your own market views.
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Can your reports you talk about your buy and sell signals, what are these signals?
  You'll find a detailed explanation of these universal buy/sell signals, which work in every market and every time-frame, in this free Special Report.