Have a look at this. //by the way the numbers in our mt4 code do not seem right/

The indicator gives us (g) and not the entropy. And g is

"average multiplicative gain per iteration of the game, i.e., after t many iterations, the gambler's capital would have increased by a factor of g^t."

If g goes up uou bet to buy. Ig g goes down you bet to sell.

If there is a low reading of (g) the probabilities are low.

I made a trial to calculate p instead of g. I hope I did right.

And p is The Shannon Probability

Attach both in the same chart. You need visually a bubble, that means we have a good probability for a signal, if they are close to the center line, it is ranging and the probabilities are bad.

I just tried to use the available code in order to compute the entropy function.

Of course consider it just as a trial.

But we need such an indicator.

I just drop a shot showing how you can use it. It is fairly simple provided the indicator is correct.

We look for a drop in the entropy function. The drop would confirm a technical break - out. The logic is the same as with the fractal break - out. This time we have an entropy break - out. Well the mathematics are a little complex but the technical use is fairly simple. I just missed that indicator and tried to do something. I am sure that in that way I could attract some coder attention for futher improvements.

So I will update and make the two versions. Comments are welcome.

The binary (entropy function.mt4) should be correct but the other is not because the implementation of formula is not correct.I need a help with the Sigma. However I have the surprise I = -log (p(x)).

for some reason, market crashes are always preceded by an increase in the root mean square of the daily marginal returns of the indices. (Which is vary characteristic of bifurcations in NLDSs.)

What is exactly ''daily marginal returns'' and how to calculate the root mean square ?Comments are welcome.

OK let take some help from Wikipedia to translate this to a common language.

In mathematics, the root mean square (abbreviated RMS or rms), also known as the quadratic mean, is a statistical measure of the magnitude of a varying quantity.

Well that looks like in simple language the daily increase of the indices.

And in the trader's language, we talk about exaustion, when the market goes really steep that may be a sign of a major possible reversal.

The guy just told something that every technical analysts knows. And that is a part of the craft since centuries.

Consider the square root of time of Gann.

My opinion is that the technical analysis is a sound methodology, when applied with wisdom. The Dow Theory gave us early warning for every possible big market reversal.

However when we apply this sound methodology to decipher the market in its details it fails. There is an interesting thread on forex factory about the technical analysis fallacy.

Please look at the shoot at the Euro/Usd, here almost every big market reversal was preceded by a very steep increase of the price.

That is why when we analyse reversal patterns it is of the biggest importance to analyse how steep the precedent trend was. That is the real key. That may distinguish a reversal pattern from a continuation pattern.

If the precedent move was very steep the odds favor a reversal pattern. If the precedent trend followed the squared time the odds favor a continuation pattern.

What we try here is to expand our knowledge and cluster the daily market price action in different states. That is because we want to exploit some market inneficies like the fractal bubbles.

The fractal bubbles are self similar. We observe them in all market frames.

They are short term market inefficiencies (well it depends on the time frame LOL).

Their observation is to me very important, because when we have a fractal and entropy break out the initiated movement can be very important. Those are possible points on no return. That means that at those points we can bet with high leverage and targeting big profits.

We do not have everyday such opportunities.

I have prepared a shot with market bubbles. I believe that this is the next generation of turtles system.

Sometimes I really doubt if I do any good sharing those ideas. Maybe it is all wrong.

However even if the market is terribly complex there are some patterns that appear again and again.

Just an fyi... I placed the bt ssa demarker on a 2 pip renkorange offline chart over the weekend... it looked beautiful... But once the market started moving last night and today... the indi does not track properly on its own. One has to refresh the indi constantly. Maybe this can be addressed by one of our renowned coders.

-The entropy breaks that line in downward direction

2. Entropy drop

-We observe a drop in the entropy

Meanwhile we have a fractal break - out:

3. A transition from a zone of high fractal dimension towards a zone of low fractal dimension crossing the 1.5 line for the FGDI or the 0.5 line for the iVAR.

Additional considerations this is an enhancement of the traditional break - out strategy giving us the possibility to filter the break - outs.

With this we cannot filter a true from a false break - out (unfortunately) but this is not the idea, the idea is to spot any transition in the structure in the market as soon as possible and act accordingly (I mean following a directional algorithm who will guide us in what direction to take the trade, it is absolutely possible to use only price action but it is my choice to use algorithms).

So previously we need to have ranging patterns confirmed by:

a) high entropy

b)high fractal dimension

NB I use the Normal BT stop ep. It is more stable however still have refreshing problems from time to time. Any improvement is welcome.

Hello John,

Thanks for the indicators

It says i missed Jma_Entropy, can you upload it please ?

I install all you give us, but it seems Jma Entropy was not there !

Thanks !

Install

Just install all the entropy indicators. I just do not have the skill to make just one indicator and I have to make icustom calls.

It is the not the entropy but a computation of the probability of up movement and down movement based on the entropy mathematics.

http://www.johncon.com/john/correspondence/990827225935.21840.html

http://www.johncon.com/john/correspondence/990827234563.22218.html

Have a look at this. //by the way the numbers in our mt4 code do not seem right/

The indicator gives us (g) and not the entropy. And g is

"average multiplicative gain per iteration of the game, i.e., after t many iterations, the gambler's capital would have increased by a factor of g^t."

If g goes up uou bet to buy. Ig g goes down you bet to sell.

If there is a low reading of (g) the probabilities are low.

I made a trial to calculate p instead of g. I hope I did right.

And p is The Shannon Probability

Attach both in the same chart. You need visually a bubble, that means we have a good probability for a signal, if they are close to the center line, it is ranging and the probabilities are bad.

Subject: Quantitative Analysis of Non-Linear High Entropy Economic Systems I

If you want the best 101 on entropy go to Noxa analitics register and download their entropy indicators tutorial.

By the way John Conover is a genius.

Files:Entropy function

I just tried to use the available code in order to compute the entropy function.

Of course consider it just as a trial.

But we need such an indicator.

I just drop a shot showing how you can use it. It is fairly simple provided the indicator is correct.

We look for a drop in the entropy function. The drop would confirm a technical break - out. The logic is the same as with the fractal break - out. This time we have an entropy break - out. Well the mathematics are a little complex but the technical use is fairly simple. I just missed that indicator and tried to do something. I am sure that in that way I could attract some coder attention for futher improvements.

Subject: Stock Market

H(p) is the entropy function, H(p) = -[p log p + (1 - p) log (1 -

p)].

This is the formula of the binary entropy function

Binary entropy function - Wikipedia, the free encyclopedia

As in the previous indicator the p was computed. I used this formula even if as far as I know the classic formula is different.

Information theory - Wikipedia, the free encyclopedia

It was just one line of code.

I hope this is correct.

So I will update and make the two versions. Comments are welcome.

The binary (entropy function.mt4) should be correct but the other is not because the implementation of formula is not correct.I need a help with the Sigma.However I have the surprise I = -log (p(x)).Files:The spirit of truth

Please read another article of John Conover.

In fact there is a whole collection. Well the math is not that hard as it appears to be at the first glance.

Subject: forwarded message from Spirit Of Truth Page

Basically, the guy saw things 10 years before they happen.

Well those indicators may be useful as we try to exploit "short term inefficiencies" characterized by fractal bubbles.

Interesting reading:

for some reason, market crashes are always preceded by an increase in the root mean square of the daily marginal returns of the indices. (Which is vary characteristic of bifurcations in NLDSs.)

What is exactly ''daily marginal returns'' and how to calculate the root mean square ?Comments are welcome.

Some answers raising more questions

OK let take some help from Wikipedia to translate this to a common language.

In mathematics, the root mean square (abbreviated RMS or rms), also known as the quadratic mean, is a statistical measure of the magnitude of a varying quantity.

Root mean square - Wikipedia, the free encyclopedia

In our case the varying quantity are the daily marginal returns of the indices.

Marginal return refers to the additional output resulting from a one unit

increase in the use of variable inputs, while other inputs are held constant.

Marginal return - Wikipedia, the free encyclopedia

Well that looks like in simple language the daily increase of the indices.

And in the trader's language, we talk about exaustion, when the market goes really steep that may be a sign of a major possible reversal.

The guy just told something that every technical analysts knows. And that is a part of the craft since centuries.

Consider the square root of time of Gann.

My opinion is that the technical analysis is a sound methodology, when applied with wisdom. The Dow Theory gave us early warning for every possible big market reversal.

However when we apply this sound methodology to decipher the market in its details it fails. There is an interesting thread on forex factory about the technical analysis fallacy.

Please look at the shoot at the Euro/Usd, here almost every big market reversal was preceded by a very steep increase of the price.

That is why when we analyse reversal patterns it is of the biggest importance to analyse how steep the precedent trend was. That is the real key. That may distinguish a reversal pattern from a continuation pattern.

If the precedent move was very steep the odds favor a reversal pattern. If the precedent trend followed the squared time the odds favor a continuation pattern.

Files:Fractal bubbles

What we try here is to expand our knowledge and cluster the daily market price action in different states. That is because we want to exploit some market inneficies like the fractal bubbles.

The fractal bubbles are self similar. We observe them in all market frames.

They are short term market inefficiencies (well it depends on the time frame LOL).

Their observation is to me very important, because when we have a fractal and entropy break out the initiated movement can be very important. Those are possible points on no return. That means that at those points we can bet with high leverage and targeting big profits.

We do not have everyday such opportunities.

I have prepared a shot with market bubbles. I believe that this is the next generation of turtles system.

Sometimes I really doubt if I do any good sharing those ideas. Maybe it is all wrong.

However even if the market is terribly complex there are some patterns that appear again and again.

Files:renkorange with btssademarker

Just an fyi... I placed the bt ssa demarker on a 2 pip renkorange offline chart over the weekend... it looked beautiful... But once the market started moving last night and today... the indi does not track properly on its own. One has to refresh the indi constantly. Maybe this can be addressed by one of our renowned coders.

Take Care

Warning

Meanwhile do not use for trading. Definitely there is a problem.

It is also repainting.

The good news is, that because it uses casual indicators it can be fixed.

The MESA mod also has refreshing problems.

Fractal and entropy patterns

Here I will give an example of the fractal and entropy pattern.

I really like it it appears that the entropy indicator works really good with the fractal dimension indicator.

So we have:

1. Entropy break - out:

-There is a horizontal line of high entropy

-The entropy breaks that line in downward direction

2. Entropy drop

-We observe a drop in the entropy

Meanwhile we have a fractal break - out:

3. A transition from a zone of high fractal dimension towards a zone of low fractal dimension crossing the 1.5 line for the FGDI or the 0.5 line for the iVAR.

Additional considerations this is an enhancement of the traditional break - out strategy giving us the possibility to filter the break - outs.

With this we cannot filter a true from a false break - out (unfortunately) but this is not the idea, the idea is to spot any transition in the structure in the market as soon as possible and act accordingly (I mean following a directional algorithm who will guide us in what direction to take the trade, it is absolutely possible to use only price action but it is my choice to use algorithms).

So previously we need to have ranging patterns confirmed by:

a) high entropy

b)high fractal dimension

NB I use the Normal BT stop ep. It is more stable however still have refreshing problems from time to time. Any improvement is welcome.

Files: