I find a very interesting discussion on the fractal nature of markets.
I too use this system quite extensively in combination with other volatility indicators.
I picked up the details of the multiple moving averages system ( which you refer to as fractal system) from the book by Daryl Guppy.
Guppy calls the bunching of moving averages as convergence of price and value. I view it as collapse of volatility and when combined with other volatility indicators (bollinger bands) and fast momentum indicators…such a system is quite useful in capturing volatility breakouts…
I too have studied technical analysis extensively but with more of a materialistic perspective. I am mostly concerned with two things 1) how to get in at the early stages of uptrend and 2) how to ride the uptrend. With regards to the former, volitility breakout system is of utmost importance. It enables one to make an initial position before the trend begins and then to buildup position as the trend gains momentum. A perfect example of tbis would be sterlite tech which had a volitility collapse @96…
Just put your fractal charts for sterlite tech…and see what a wonderful opportunity it gave to accumulate at 96…
Secondly, since market is fractal in nature…so why not use the multiple moving average s,ystem on longer time frames…weekly, monthly…quarterly. what works soo well on hourly and daily charts should work equally well for longer time frames.
Just try this approach with quarterly charts on aksh optifiber and hcl infosystems…you would notice that these are poised for a volatility breskout on quarterly charts. And a stock which has a breakout on quartrrly charts can keep going up for a quite a number of quarters…and incidentally thats how i would define a muktibagger stock (one which keeps going up for a few years).
So the fractal system / mma system on quarterly charts answers both my questions…just try it on aksh optifibre and hcl info
Discl…i am invested in aksh optifibre and watch hcl info quite keenly.
I would like to discuss another interesting aspect of fractal nature later on…what if there is simultaneous and similar pattern on all the time frames…i picked up the idea from Connie Brown. She says it may lead to a steep / violent breakout