Discussing the article: "Chaos theory in trading (Part 2): Diving deeper"
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Check out the new article: Chaos theory in trading (Part 2): Diving deeper.
We continue our dive into chaos theory in financial markets. This time I will consider its applicability to the analysis of currencies and other assets.
Fractal dimension is a concept that plays an important role in chaos theory and the analysis of complex systems, including financial markets. It provides a quantitative measure of the complexity and self-similarity of an object or process, making it particularly useful for assessing the degree of randomness in market movements.
In the context of financial markets, fractal dimension can be used to measure the "jaggedness" of price charts. A higher fractal dimension indicates a more complex, chaotic price structure, while a lower dimension may indicate smoother, predictable movement.
There are several methods for calculating fractal dimension. One of the most popular ones is the box-counting method. This method involves covering the chart with a grid of cells of varying sizes and counting the number of cells needed to cover the chart at different scales.
Author: Yevgeniy Koshtenko