Nifty and Gold, Power of Fractal Nature! Why patterns work? Spot the difference!

We believe in the theory that freely traded markets are patterned and exhibits fractal nature.

This makes them behave in a predictable manner. By pattern we mean that there are certain structures that repeat itself from time to time and can be seen on charts that shows prices of any tradable instrument. The “Fractal Nature” is again an important concept which states that these repeatable patterns occur on varied time scales and can be seen on 1 minute charts to Daily charts to Monthly charts. Fractal structure is seen in nature across from DNA to snowflakes to galaxies and so it is also seen in stock markets which reflect collective emotions and social mood of humans.

Can you Spot the difference?

Chart 1:

Chart 2:

Now we will reveal what are above 2 charts.

The first chart is of Nifty daily chart showing the big green Sitharaman candle and the 2nd is a 15 minutes chart of MCX Gold. Isn’t it astonishing to see such similarities across time frames?

The big up move in Nifty was on corporate rate cut announcement by Sitharaman post the double bottom type of formation and the next is of Gold on a 15 minutes time frame. A big candle on upside post double bottom formation on Gold that too on a 15 minutes time frame.

The above clearly shows that irrespective of the events markets are exhibiting patterned behaviour across the time frames which are nothing but a fractal nature working across the universe.

So, how does it help in trading?

Elliott wave and Neo wave are based on this basis premise that the patterns that are working on a tick chart are also working on the bigger time frames. In addition to this by combining Fibonacci ratios and projection one can at times predict the exact turn. By knowing fractal nature one can know what to expect next and how prices will behave. News or events will only clutter the reasoning but what works is the ability to decipher the chart.

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