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Indicators: Variation Index

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Automated-Trading 2011.09.27 13:13 

Variation Index:

Variation Index shows if a trend or a flat movement is prevailing in the time series or random behaviour.

Nowadays, the most popular representatives of the fractal time functions are the financial time series. The fractal structure of these series is well-known and aсcording to Mandelbrot is a "theoretical reformulation of a down-to-earth bit of market folklore-namely, that movements of a stock or currency all look alike when a market chart is enlarged or reduced so that it 5ts the same time and price scale".

Usually, to determine the fractal dimension the Hurst's exponent is calculated. However, for the reliable calculation of this exponent a huge amount of data is necesary (~ 10^3) and that is too much comparing to the duration of the trends of trading.

The suggested indicator calculates the variation index on a previous interval which is 2^n long. The "n" parameter is specified by the user.

Author: Nikolay Kositsin

Variation Index

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