Compresses 8 fractal oscillator timescales into a ribbon of up to 5 composite lines. This is a smoother version of the original Fractal Composite with alerts on reversals in the overbought/oversold zones.
Fractal Composites normalize and 'cartoonize' the price chart to fit and bounce between statistically-defined overbought and oversold zones. Each lines resembles the shape of the price wave on a different time/size scale, with some distortion as the size of price movement fluctuates. Conceptually, reaching the overbought/oversold zone corresponds to price reaching a ribbon of Bollinger bands, though our 'band statistics' are much smoother and more mathematically sophisticated than standard Bollinger.
Because markets have similar fractal behavior across all timescales, this indicator applies to any timescale, from 1 minute to 1 hour or 1 day. You shouldn't really need to futz with the numerical parameters -- the most important choice is your chart timescale for how fast you want to trade. A faster timescale will show you more dotted reversals in the overbought/oversold zones to trade. The 'Show...' checkboxes let you choose how many composite lines, lag lines, and crosses to see. Information overload? Or a reminder that any single indicator embeds many assumptions about time and price scale in its signal...
Within long, strong uptrend channels or "Wave 3 of 3s" like this month's relentless S&P rally, notice how long all composite lines can hold up in overbought land, dipping at most back toward neutral (0) at each touch of the lower channel while seldom becoming oversold. In these conditions, the dips back to neutral are your rebuy points, and price may not have fallen much since the last sell cross at channel topside.
During corrective market action (Elliott waves 2 and 4), the composite lines will bounce more evenly between overbought and oversold zones. At the end of a long set of ABCDE triangles, the oscillators tend to settle towards neutral before the next big breakout.
pythagoras
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Some people have asked about trading strategies. I'm way weaker on trading strategy than math, but here's how I've been using this indicator:
If your favorite Elliot wave gurus suggest we're in the middle of corrective market action (a wave 2 or 4), then buy/cover when thinner L1 or L2 lines crossover in the tan overbought zone, and sell/short when thinner lines reverse in the pinkish oversold zone.
If you suspect an impulsive/trending action (as indicated by strong saturation of the slower timescales), then trade with the trend and reload on each dip toward neutral. Once all the oscillator-saturating wave 4s and 5s exhaust themselves, thicker composite lines L3-L5 will be rolling over. You may also notice a sudden burst toward the opposite zone by all composites with strong 'divergences' on the new 1-2 reversal. 'Divergences' are when price makes a new lower low but the oscillator line doesn't -- it makes a higher low e.g. on the wave 2 dip. Divergences will appear on faster timescales first.
The analyst behind tradingwavepatterns.com is a brilliant mathematician Dr Razvan Satnoianu from Oxford University who inspired my explorations of fractals, though I still don't seem to have reproduced all of his capabilities. His S&P calls can be eerily accurate. He caught and stayed with the entire Brexit and Trump rallies despite vociferous opposition to both Brexit and Trump! That's some pretty impressive trading discipline...
GummyBear18
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@pythagoras, what time multiplier does each of the 5 lines represent? thanks and great stuff.
pythagoras
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@GummyBear18, With ribbon spread zero they're exactly a factor of 2 apart. The ribbon spread parameter can tweak this a bit bigger or smaller than 2.0
lotha84810
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thank U for this indicatior, I'll try it
BorsaPanda
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Hİ, I Recently discovered your work and I am amazed. Thank you for your generosity. I got a question related to alert "up cross fast" means fast lines get out of the oversold region or what? thanks.
stockspy
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@pythagoras this is actually a very good indicator to use on an intraday chart, even a 1 minute chart. Which I am quite surprised about. Very nice thank you.
cpatr922
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can you fix the plot naming ? I want to create alert based on that and it's very difficult since the plot name is all the same.
PedroTeam
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Very cool.
BullTradingAM
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Impressive work pythagoras, I´m eager to try it :)
During corrective market action (Elliott waves 2 and 4), the composite lines will bounce more evenly between overbought and oversold zones. At the end of a long set of ABCDE triangles, the oscillators tend to settle towards neutral before the next big breakout.