Using Fractal Dimension to Distinguish Trends from Ranges

Summary

The document introduces the Fractal Dimension Index (FDI) as a measure of how irregular a price path is, with possible use as a stock market indicator. It interprets readings on a scale from 1 to 2: values nearer 1 represent a straighter, more trend-like path, while values nearer 2 represent movement that fills a plane and resembles range trading. The framing suggests that markets may alternate between trends and ranges, and that an unusually straight move could precede a change in behavior.

The text says this implementation follows Carlos Sevcik’s method with a correction to an inverted formula, attributed to Alex Matulich. It provides a conceptual explanation, not a worked calculation, trading rule, or performance evidence. It does not specify a lookback period, thresholds, or how to confirm a reversal, so the index alone cannot establish that a trend will end or support a validated trade.

Key ideas

• The Fractal Dimension Index describes the irregularity of a price path.
• Its stated range runs from 1 to 2, with lower values associated with straighter movement.
• Values nearer 2 are described as more like two-dimensional, range-bound price movement.
• The document reports that this version corrects an inverted formula attributed to Sevcik.
• No trading thresholds, test results, or reversal confirmation method are provided.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.