FX TRADING SYSTEMS Fractal Dimension stdDevs (2000 window size) 0.08 0.06 0.04 0.02
r e m a i n s f a i r l y constant as a function of slice size with the r a n k in g s for a slice of size 2000 shown in Figure 4. It
is 0.00 very Pair Figure 4
smallest deviations which means that these pairs have the smallest variations in their character as a function of time. This contrasts very significantly with symbols like the EUR/CHF and the USD/CAD where the variation is much higher. The standard deviations also follow a power law decay as a function of the slice size, showing that at longer time scales the character of the series tends to vary less. This may explain why historically profitable strategies are often easier to find on higher time frames since variability in character is smaller at longer time scales.
The ranking between the series 46 FX TRADER MAGAZINE January - March 2017
interesting to notice how the r a n k ing in the s t an dar d deviation is practically
opposite to the ranking showed in Figure 2. This may be directly related to issues such as liquidity and interventionism. A currency pair like the EUR/CHF is not very liquid and may because of this show a significantly higher degree of inefficiency but the frequent intervention of the Swiss central bank tends to radically change the nature of these inefficiencies as a function of time. In the case of the USD/ CAD this may not be directly tied to central bank intervention but rather to the dependence of the pair on commodities such as oil, which suffer from a significant degree of political interference. Due to this it is
expected that finding persistent long term inefficiencies on these pairs will be very hard since their character is bound to change significantly with time, even if the series do deviate strongly from the behavior of an efficient financial time series.
With the information presented above we can conclude that all the studied symbols have fractal dimension characteristics different from those expected from efficient series and are therefore all subject to the finding of profitable systems. However
the character of the
series changes more strongly on some currencies compared to others and it is therefore important to focus on those series where these oscillations are the smallest. This means that the best possible series for finding systems according to this analysis are the EUR/ USD, USD/CHF and USD/ JPY. Since the AUD/CHF and CHF/JPY already show an increase
in the standard
deviation of nearly 20% when compared with these series it is expected that finding strategies that work on them will already be significantly harder.
Daniel Fernández
Founder of
Asirikuy.com and
Mechanicalforex.com
Fractal Dimension StdDev
EURUSD USDCHF USDJPY
AUDCHF CHFJPY EURCAD
GBPAUD GBPJPY
EURAUD AUDUSD EURJPY CADJPY GBPUSD
AUDCAD EURCHF USDCAD
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