Fractal Theory I

[llIHeroic]

Good question midtown. I believe in one of my images at the beginning of the thread, I stated that the FTT's of the smaller fractals form the points of the larger fractals.

As we need to draw the line somewhere, and there is a limit to how much is visible to us on the 5m interval, we just use the geometry of two price bars as a starting point, and construct our FC's from there. However, after that point we have a superior data set by which to build our larger fractals; which is the actual points of failure of the lower fractals.

We draw the RTL in, at the point of completion of the second leg of the container, by beginning at P1 and sharpening the line until we hit a price data point in the second leg. At times this isn't actually at the FTT of the second leg's container, but we're prevented from drawing to there if doing so would intersect any price bars. This gives us our slope.

RTL's are modified by certain VE's, but let's leave that aside for now. It's easy to assume we create our LTL with the same geometric constraint, but that isn't the case. The LTL of a container is active at the moment of the FTT of the container creating the first leg of the trend forward. This is where the LTL is fixed, not the point of highest volatility in the first container.

 

[Vertex]

In real-time, what would keep you from thinking the bar marked P2 is the end of the trend, and acting upon it? It seems to be a SOC bar & we also get what would have been a RTL cross (and also IBV). Any clues there that I'm missing, or have I identified the built-in risk that simply can't be accounted for in real-time?

This is something I always run up against when I study this method. Everything up to Pt2 seems to satisfy the requirements of a container and a volume cycle. Is there something that signals that there will not be an opposite container with volume cycle from PT2 to PT3?

I suppose this is related to my first question in a way, but from the opposite direction.

Attached the chart again for reference.

Thanks!

 

[midtown]

This is something I always run up against when I study this method. Everything up to Pt2 seems to satisfy the requirements of a container and a volume cycle. Is there something that signals that there will not be an opposite container with volume cycle from PT2 to PT3?

I suppose this is related to my first question in a way, but from the opposite direction.

Attached the chart again for reference.

Thanks!

I wouldn't have thought that to be a SOC because it doesn't look like the FC leading up to P2 matches the complexity of what came before.

 

[Vertex]

I wouldn't have thought that to be a SOC because it doesn't look like the FC leading up to P2 matches the complexity of what came before.

Thanks for the reply.

I am not sure which one you are referring to. I added some thick lines on the chart colored red and pink. Which one are you referring to that doesn't match the complexity of what came before?

The Pink container seems to be a piece of the Red container and is a simple increasing red volume dominant leg. This seems to fit perfectly as the non-dominant of the Red container is a simple decreasing black as there doesn't appear to be any increasing volume in the non-dominant. Or do you define complexity based on price alone?

Thanks very much!

 

[midtown]

Thanks for the reply.

I am not sure which one you are referring to. I added some thick lines on the chart colored red and pink. Which one are you referring to that doesn't match the complexity of what came before?

The Pink container seems to be a piece of the Red container and is a simple increasing red volume dominant leg. This seems to fit perfectly as the non-dominant of the Red container is a simple decreasing black as there doesn't appear to be any increasing volume in the non-dominant. Or do you define complexity based on price alone?

Thanks very much!

I'm just learning this too, so all I can tell you is what I've observed in my very limited experience, and that is that there are a number of elements that make up complexity, and price is not one of them. Up to a point, you might look at number of bars, number of FC's if there was only one or were there three, increasing volume, presence of a complete volume cycle, whether there was an FTT. Laterals may require drilling down further to see what is going on and whether there is increasing volume at a finer level. Nuances beyond my current level of understanding will certainly reveal additional elements of complexity that I haven't even considered.

I have been trying to use the annotation practice posted by Heroic. I get easily confused if there is a multitude of colors and boxes that help some traders but they don't help me.

If you want, I would be happy to take a stab at annotation from the start of the sequence. But until it becomes available as a replay in Ensign, which is usually at least a week after it happens, I don't have the tools to do it.

I hope this is helpful, but anything I say today could turn out to be wrong tomorrow.

 

[plantrader]

Thanks for the reply.

I am not sure which one you are referring to. I added some thick lines on the chart colored red and pink. Which one are you referring to that doesn't match the complexity of what came before?

The Pink container seems to be a piece of the Red container and is a simple increasing red volume dominant leg. This seems to fit perfectly as the non-dominant of the Red container is a simple decreasing black as there doesn't appear to be any increasing volume in the non-dominant. Or do you define complexity based on price alone?

Thanks very much!

One view might be that BBT1 from Pt1 to Pt2 is complex (since the lat represents nondom by definition) and it has a full volume cycle. However, BBT2 does not have a full volume cycle because there is no return to incr black vol after BBT's pt3, even though it's obvious in hindsight something ended in that lat. We can use the volume within it b/c of what type of Lat it is, but there is still no IBV which means BBT2 is not equal weight to BBT1. And that blows the theory that the first attempt at a BBT3 isn't valid due to not being equal-weight to BBT1 (because neither is BBT2). So that establishes that we aren't requiring the BBTs to be equal-weight as far as the person who annotated that chart originally. And if that's the case, then the first BBT3 could be valid simply with a pt123ftt. So that begs the question again... why wouldn't the 1420 to 1440 area of upward price movement, and DBV to IBV which crosses the existing RTL in "real time" and had a valid FTT and SOC (signal of change bar), not be seen as the start of a new Up Tape? We'd already built everything necessary to have a valid Down Tape. Yet, we ended up having to fan around that area because we got continuation of the existing valid down tape. What would keep a user of this method from going long? Leaving that aspect out when explaining in hindsight using EOD charts means we're leaving out a big piece of the equation in real-time when it comes to trading decisions. This type of situation occurs a lot during run-on trends. Some allude to having further clues such as "lower trough, higher peak" (relative trough & peak analysis) but they avoid explaining it clearly or in detail and don't point out the situations where it may occur but not be a valid clue when other times it is. So, anybody have any tips to know that the Tape wasn't completed around 1420 on that chart?

 

[baro-san]

When the market doesn't obey your rules the only conclusion can be that your rules need to be revised.

There are several examples in this thread, with annotations authored by different "volume leads price" followers, that show the same pattern, same tradeable container.

Here there are a bunch of charts:

 

[smwbbe]

So much of the premise of this method hinges on WMCN - What Must Come Next. If you think the market has built a tape, you expect a tape to follow in the opposite direction. If that does not occur, the initial tape is still in process.

 

[plantrader]

So much of the premise of this method hinges on WMCN - What Must Come Next. If you think the market has built a tape, you expect a tape to follow in the opposite direction. If that does not occur, the initial tape is still in process.

Yeah, that's my point as well. It's easy to see if a tape in the opposite direction fails (in hindsight), but what about in real time? We know WMCN, and the previous thing already "has everything it needs". So upon an FTT / SOC (and maybe even a RTL cross if one waits for more confirmation), we'd enter a trade in the opposite direction. The big question is, what would prevent one from thinking that's a good decision? WMCN looks like it's forming, then it fails & the trend continues (which means we have to fan around the failed wmcn) and it's a stopout trade, right? The EOD view isn't as useful as being able to 'know' in real time.

 

[plantrader]

When the market doesn't obey your rules the only conclusion can be that your rules need to be revised.

There are several examples in this thread, with annotations authored by different "volume leads price" followers, that show the same pattern, same tradeable container.

Here there are a bunch of charts:

What about the instances where you have similar conditions, meaning... you have the potential to declare "implied IBV" but the trend subsequently continues and you get more true IBV? Yet, you'd already had to decide in real-time that you have "implied IBV" (which btw, we'd wonder about quite often in real-time vs EOD analysis), and therefore decided you had a valid FTT and SOC and maybe even RTL cross? That means you'd have entered on an "implication" that failed, right? That's the same idea as looking at a 2min chart for clues. If one goes down that road, then in real-time we'd be doing it all over the place any time it "might" be applicable. Which in turn means in real-time the trading decisions are clouded.

Are there clues to tell one that it is time to consider implied IV vs not considering it (all other things being equal)? Those subjective factors look slick & savvy @EOD but in real time it creates MANY more possibilities for making decisions which may turn out to be wrong as things unfold when dealing with run-on fractals. This is why I ask about what the clues are. Some relative volume level, in general? For example, if the FTT hasn't yet exceeded the fractal's Pt2 (which happens somewhat frequently) do we have to meet another condition in general such as dom volume having exceeded levels achieved during the nondom leg of the fractal? Or any other clues? Assuming we have met our "equal weight" criteria already (etc, etc) or whatever one requires as the minimum necessary criteria.