Tic Volume, Fractal dimension and Volatility Cycles

Here I would like to add some observations. In the main article I described the Curtis Faith market states cycles. Here I would like to add some more insights.

Let start with the data. Here we can see a tic volume chart. On the tic volume chart we can see that there is a ciclicity in the in the tic volume.
The ATR cycles

The lower indicator is the ATR (Average True Range). This is a volatility indicator. We can see that the volatility is positively correlated with the Tic Volume. What is interesting is that we can see periodic cycles in the volatility as well.
The iVAR readings
Basic explanation once again (I repeat my self I know).
The lowest indicator is the iVAR. This is a fractal dimension indicator. Most of the readers here are really advanced but I will briefly explain what it means.


-iVAR below 0.5


The readings of this indicators of they are below 0.5 that means that the movement is persistent (there is a bigger probability that the next movement will be in the same direction as the previous). In our technical analysis context means that the next bar would go in the same direction as the previous. And that is really very important for every technical trader.
Why?
1. It is important if we play a break - out through a certain level.
2. It is important if we follow a lagging indicator. Even if the indicator is lagging it still will work because the next bar movement is in the same direction as the previous and the lag works for filtering the noise.
3. Basically brain trend excels in this kind of environment


-iVAR above 0.5


Basically this means that the movement is anti-persistent. The next movement will be in the opposite direction as the previous. From a technical analysis perspective that means that the next bar would be in the opposite direction than the previous.
However please do not confuse this with the technical analysis definitions of trend and range. This is something completely different. This is how the price series fulfill the space. Here I should explain that the iVAR is sgowing the same thing as the FDGI (fractal dimension graph index). However for FGDI it moves from 2 to 1, and iVAR moves from 1 to 0. The center line for FGDI is 1.5 for iVAR is 0.5.
More the iVAR is the inverse of the Hurst exponent (H) and FGDI (measuring the fractal dimension) = 2- H.
If the Hurst exponent os 0.51 the iVAR would be 0.49 and the FGDI would theoretically be 2-0.51= 1.49.
Anyway those exponents are not calculated they are estimated and different algorithms exist for that. And the probabilities they calculate are in practice very small, for example if iVAR has reading of 0.47. That means that there is 53 % of chance that the next movement would be in the same direction than the previous.


-iVAR at 0.5 level.


This means that the movement is totally stochastic the probability of going up or down is the same.


The iVAR cycles


It is important to mention that the iVAR has also cycles but it cycles are not going together with the volatility cycles. The fractal dimension cycles look like they lack any clear cyclic osclilatory pattern. However they have one very important feature. If they are antipersistent that will continue for some time than they will move lower and they will become persistent.


So We could combine this analysis with the volatility analysis and see when there is an increase of volatility. I mean when we expect the cyclic increase then we should pay attention in what fractal dimension cycle we are.
If we are clearly antipersistent. Please do not expect any impulse following algorythm to work well, as brain trend for example. But if we have a break out (readings of iVAR above the 0.5 are crossing the 0.5 line and going lower) we can be confident in ours impulse following systePublish Postms.