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Hi Bob,
I don't want to take too much time on this but Chaos theory is a little more
complex than a simple analogy that was presented by the author of the book
mentioned in your post. There are specific conditions that need to be met before a
system can be determined chaotic. Off the top of my head I don't know them, but
the book by Devaney on Chaos Theory has some of them. There is also a mathematical
economics text book by Hands (I believe) that also has some accepted conditions
for chaos.
I think that one is better off sticking to statistics when they use the Raff
Regression Channel.
Harley
BobRABCDEF@xxxxxxx wrote:
> One of the problems with Chaos theory has been in applying it to trading. TA
> tools already exist in most trading software to apply the theory under another
> name.
>
> Gilbert Raff has a chapter in his book "Trading the Regression Channel". The
> chapter is titled "The Regression Channel As A Chaotic Attractor". Here are
> two paragraphs from that chapter:
>
> "Let's return to the example of the cigarette. Imagine a cigarette holder
> standing straight up in a perfectly still room. Theory teaches us there is
> simply no way to predict the coils and loops the smoke will make as it rises
> from the cigarette. However, if we were to position a TV camera on the
> ceiling, and film ten thousand cigarettes in a row, while the smoke would
> never make the same pattern twice, it would also never travel beyond a thin,
> conical boundary as it rose in the air. In the new language of Chaos Theory,
> this reliable boundary enclosing a completely unpredictable pattern is called
> a Chaotic Attractor."
>
> "Regression Channels, with their puzzling property of containing price for
> years, are like the boundary constraining the smoke. The best theory I can
> offer for the behavior of price near a Regression Channel Line is that it is
> tracing out a Chaotic Attractor for the security it is describing."
>
> Note that price tends to accelerate towards the "attractors". The attached
> chart, here and on the next post, show that the attractors based on historical
> data extend into the future and still maintain an influence on prices. So, if
> you are looking for an equation to find chaos attractors, look at the formula
> for regression channel lines.
>
> BobR
>
> ------------------------------------------------------------------------
> [Image]
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