Transient Harmonic Fractals
Posted: Tue Oct 12, 2021 11:08 pm
Over the years I have mentioned Transient Harmonic Fractals on this board many times but never really delved into the concept on any substantial level. Conditions in the market last week had me dealing with them quite a bit but didn’t have the time to do a post on anything. However time constraints have finally eased a bit so going to give that a shot at it now.
Okay, Transient Harmonic Fractals or THF … what are they? Essentially they are movements in the market that repeat in like duration and amplitude over x amount of iterations. Most traders consider these to be cycles within the market and to an extent they are. However real cycles within the market expand and contract to various degrees and are continuous though time. If you want to work with real market cycles I suggest the study of Hurst. He got many things right but in my opinion many things wrong also. Still, his work has great merit. So much so in fact that my own cyclical analysis approach is based on his work as its foundation.
THF most closely resembles the work of John Ehlers whom I once had the pleasure of speaking with many years ago. The man and his work are brilliant and another I would suggest that you study. THF’s can happen in just about any market condition but are especially prone to occurrence in trading ranges. In fact you will often find them within the trading range of a trading range of a higher degree. They can also occur in trending markets but are much harder to spot and can be “sloppy’ at times. My research has shown that they occur rather infrequently, less then 10% of the time, and on average have anywhere from 3 to 5 iterations. More are possible but you won’t see them often. Once the duration and amplitude pattern are broken the harmonic fractal pattern is over and hence the their transient nature.
So now lets turn to a THF pattern I traded last week on the 6th of October. My primary Natal Forecast was way off and went to a secondary model which I quite frankly didn’t like either. So I ended up watching both. The NF definitely had a THF bent to it but didn’t get interested until a little after 1000 or point C on the first chart. Amplitude and duration were not syncing up properly but thought this could be due to the “wobble” effect inherent in NF predictions. After the peak at point 1 I strongly suspected a THF in the making and tossed up a Lomb Periodogram. While I prefer maximum entropy or single spectrum analysis to hunt for THF's the Lomb is a very good alternative and something you won’t find in most trading programs. Points 2 and 3 are a bit shaky but near enough for me to believe a THF is about to happen. At 1130 I’m sitting chilly and get a beautiful 3 bar pattern (labeled a-b-c in black) and enter on the market at c bar. As price action unfolded I was able to catch solid portions of each wave with the exception of the one ending at point 8 where I was late in and early out ... never a good combination. I’m back in long after point 8 but I already have 3 iterations of the fractal so once the market blows past previous highs I change my approach as I am sure the THF pattern is now over.
In the second chart below we can look at this pattern in a different way using what I call True Value Energy or TVE. The TVE concept is another sub-theory of Energy Flow. While TVE can at times define an energy signature that is not it’s real purpose. What it is actually trying to do is catch points within the energy signature where the flow of energy is strongest at extreme. Think of the flame on your stove. It is controlled and burns evenly depending on how high you turn it. Energy acting on markets that produces a reaction does not flow so evenly. It is much more like a campfire with the way it burns dependent on the composition of the molecules within the wood itself and the environment it is in. What TVE attempts to do is capture energy extremes and eliminate movement that can be attributed to momentum. This is accomplished by simply drawing lines that have has many touch points as possible. Here I was looking for targets after the THF breakdown. All I did was draw a couple of TVE lines that defined energy max and energy min and measured with GS ratio's. There were two solid targets at 2.32 and 3.57. A more recent example of TVE in action comes form today’s trading. In this example I was looking at a wedge forming in the market and defined it by using 3 TVE lines. The interesting thing here was how they converged right on a signal from the Planet Rise Harmonic indicator. Once again I was sitting on this with plenty of time to spare and caught a nice move off a very sloppy open.
That's about it for now. As always hope some of you guys enjoyed it.
All the Best,
Joe
Okay, Transient Harmonic Fractals or THF … what are they? Essentially they are movements in the market that repeat in like duration and amplitude over x amount of iterations. Most traders consider these to be cycles within the market and to an extent they are. However real cycles within the market expand and contract to various degrees and are continuous though time. If you want to work with real market cycles I suggest the study of Hurst. He got many things right but in my opinion many things wrong also. Still, his work has great merit. So much so in fact that my own cyclical analysis approach is based on his work as its foundation.
THF most closely resembles the work of John Ehlers whom I once had the pleasure of speaking with many years ago. The man and his work are brilliant and another I would suggest that you study. THF’s can happen in just about any market condition but are especially prone to occurrence in trading ranges. In fact you will often find them within the trading range of a trading range of a higher degree. They can also occur in trending markets but are much harder to spot and can be “sloppy’ at times. My research has shown that they occur rather infrequently, less then 10% of the time, and on average have anywhere from 3 to 5 iterations. More are possible but you won’t see them often. Once the duration and amplitude pattern are broken the harmonic fractal pattern is over and hence the their transient nature.
So now lets turn to a THF pattern I traded last week on the 6th of October. My primary Natal Forecast was way off and went to a secondary model which I quite frankly didn’t like either. So I ended up watching both. The NF definitely had a THF bent to it but didn’t get interested until a little after 1000 or point C on the first chart. Amplitude and duration were not syncing up properly but thought this could be due to the “wobble” effect inherent in NF predictions. After the peak at point 1 I strongly suspected a THF in the making and tossed up a Lomb Periodogram. While I prefer maximum entropy or single spectrum analysis to hunt for THF's the Lomb is a very good alternative and something you won’t find in most trading programs. Points 2 and 3 are a bit shaky but near enough for me to believe a THF is about to happen. At 1130 I’m sitting chilly and get a beautiful 3 bar pattern (labeled a-b-c in black) and enter on the market at c bar. As price action unfolded I was able to catch solid portions of each wave with the exception of the one ending at point 8 where I was late in and early out ... never a good combination. I’m back in long after point 8 but I already have 3 iterations of the fractal so once the market blows past previous highs I change my approach as I am sure the THF pattern is now over.
In the second chart below we can look at this pattern in a different way using what I call True Value Energy or TVE. The TVE concept is another sub-theory of Energy Flow. While TVE can at times define an energy signature that is not it’s real purpose. What it is actually trying to do is catch points within the energy signature where the flow of energy is strongest at extreme. Think of the flame on your stove. It is controlled and burns evenly depending on how high you turn it. Energy acting on markets that produces a reaction does not flow so evenly. It is much more like a campfire with the way it burns dependent on the composition of the molecules within the wood itself and the environment it is in. What TVE attempts to do is capture energy extremes and eliminate movement that can be attributed to momentum. This is accomplished by simply drawing lines that have has many touch points as possible. Here I was looking for targets after the THF breakdown. All I did was draw a couple of TVE lines that defined energy max and energy min and measured with GS ratio's. There were two solid targets at 2.32 and 3.57. A more recent example of TVE in action comes form today’s trading. In this example I was looking at a wedge forming in the market and defined it by using 3 TVE lines. The interesting thing here was how they converged right on a signal from the Planet Rise Harmonic indicator. Once again I was sitting on this with plenty of time to spare and caught a nice move off a very sloppy open.
That's about it for now. As always hope some of you guys enjoyed it.
All the Best,
Joe