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June 2010 Stocks and Commodities Traders Tips


Fractal Dimension As A Market Mode Sensor

Original article by John F. Ehlers and Ric Way
AIQ Code by Richard Denning
Traders Studio Code by Richard Denning

AIQ Version:

The AIQ code for John Ehler’s indicator from his June 2010 article, “Fractal Dimension as a Market Mode Sensor”, is shown below.

In Figure 1, I show the indicator plotted on a chart of the S & P 500 ETF (SPY).

AIQ EDS Code for Fractal Dimension As A Market Mode Sensor:
FracDimen.eds
(RIGHT CLICK AND CHOOSE "SAVE AS." DO NOT LEFT CLICK OR YOUR BROWSER WILL TRY TO OPEN THE FILE.)


Traders Studio Version:

The TradersStudio code for John Ehler’s indicator and the related functions from his June 2010 article, “Fractal Dimension as a Market Mode Sensor”, is shown below.

To test the effectiveness of the Fractal Dimension Indicator, I chose three different portfolios of futures contracts using reverse adjusted daily bar data supplied by Pinnacle Data Systems:

1. eMini index portfolio: EN, ER, ES & YM
2. Full size index portfolio: DJ, MD, ND, SP
3. Day session futures portfolio: AD, BO, BP, C, CC, CD, CL, CT, DJ, DX, ED, FA, FC, FX, GC, HG, HO, HU, JO, JY, KC, KW, LC, LH, NG, NK, PB, RB, S, SB, SF, SI, SM, SP, TA, TD, UA, W

On each of these portfolios I ran tests with both a typical oscillator and a typical trend following system. Then to determine the effectiveness of the trend/cycle filter, I tested the typical systems both with and without the trend filter. The oscillator system uses a slow D stochastic, entering when the oscillator indicates a reversal from an overbought or oversold level. The trend following system uses a 20 bar channel breakout for entries.

For the oscillator system, I eliminated the signals when the Fractal Dimension Indicator was in the trend mode. For the trend following system, I eliminated signals when the Fractal Dimension Indicator was in the cycle mode.

In Table 1, I show some sample metrics for back tests from 11/26/2002 to 4/5/2010 for all three portfolios. The filter applied to the oscillator shows some improvement over taking all signals, whereas the filter applied to the trend following system did not improve any of the metrics. The results were consistent with all three portfolios. In Figure 1 and Figure 2, I show the comparative equity curves for the two systems traded both with and without the Fractal Dimension Indicator filter.

Captions:

Figure 1: Equity curves for slow stochastic system with and without the Fractal Dimension Indicator filter on the eMini index portfolio.

Figure 2: Equity curves for the channel breakout system with and without theFractal Dimension Indicator filter on the eMini index portfolio.

Table 1: Comparative metrics for the two types of systems with and without the Fractal Dimension Indicator filter.

Traders Studio Code for Fractal Dimension Indicator:
Fractal Dimension Indicator.zip
(RIGHT CLICK AND CHOOSE "SAVE AS.")

 

 

 

 

 

 

 

 

 

 

 

 

 

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