Using Fractal Dimension to Distinguish Trends from Ranges

Summary

This note introduces fractal dimension as a way to describe how price patterns retain similar roughness across chart timeframes. It explains the concept through covering a pattern with objects of different sizes: the relationship between the number and scale of those objects characterizes the pattern’s sparseness. The source attributes the indicator discussion to a 2010 article by John Ehlers and Rick Ways.

The proposed trading use is as a market-mode filter rather than a directional signal. A threshold is used to classify conditions as trending or ranging, with the note stating that readings below the target indicate a range and readings above it indicate a trend. No calculation details, threshold value, chart examples, or performance evidence are supplied, and the threshold interpretation may depend on the specific indicator implementation. The material is a brief conceptual description, not a validated standalone trading strategy.

Key ideas

• Fractal dimension describes pattern roughness and sparseness across scales.
• The note relates dimension to how many objects of different sizes cover a price pattern.
• The indicator is presented as a market-mode classifier rather than a directional signal.
• A threshold separates range conditions from trend conditions, but no value or validation is provided.

Tags

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