Fractals in AI Based T1 Geet & ding Benoit Manerot,the French Mathematician, determined that only asks, fractals a capable of capearing te reall Thisis an abstract objec use to describe and simulate naturel occuring systems, Mandelbrot explains it as, °A fractals a shape made of parts Fractals are silar to many naturally oseutting forms such a tres, DNA, lighting bolts, ocean waves, among others For markets, we ned to foews on As wind blows across fluid surface, cause the fui to form waves In the ease of ogean waves there are aspects of randomness due tothe fac that waves different in height, shape, and dation. With no real way to prediet any ofthese factors, ‘awe are classi as stochastic process. Meaning made up of ran hat they are objects variables. Stochastle processes are used asMarkets, ike ocean waves, have turbulence that ean be modeled with fincas. One day person ean visa beach and see ealm smooth water with litle change ew days late the same water wil be violent with st ‘moving waves crashing ont the shore. Markets do the same thing, ‘rca ate formed by recursion, Here you take a simple esuation, casa ‘tule the answer to re-caeulate tan repeat ina neverending lop. Before we get ack to markets there must bea discussion on the Coastline aa. This the concep that scle mater. When measuring coastline with ruler (12 inches long) one would get a much ager total than they wed aod one meter long and smaller sil hey used an even Longe poe ‘The reasons the amount of rrgularity lost at the larger scale. Consider stock chert zoomed out to one year. t appears asa smooth wave like shape. ‘Zoom to that char at one month and the smoothness dlsappear. snow series of tiny up and down bumps instead of sooth ine, Change the scale again to one day and the bumps become more visble and much more Aramati -Bven thought the chart becomes more detailed the more Its 200med, the shape ssimar over the course of yeas, month, or even day Fractal ‘Geometry proves the math to study such poters that remain the same ‘through scales of ime change. A phenomenon known as invarianeesin mathemati, ‘Fractal donot predict market prices. They do provide estimates ofthe probability of what the market might do nthe future. Giving us a prediction ‘of volatlity instead of pic. This is due othe fet that wou lasts Big jumps come just before othe big jumps. Smal change comes ust before smal change Prodlting volatityf smart predicting the weather: Both aelargely correlated with recent events, However, sometimes irains when twas suppose tobe sunny. rie movements ae probably unpredictable and donot conform ta bellseaped dstution, That i we carn say something ike, this stock will De ‘up S2by Monday” Yee prices are not mutually independent or randomly Aistibuted. Meaning we can predict volatility and Al should beable todo The most exiting wse of Alin tring right now fdscovering fetal pe patterns in the prices of exchange traded asots, These may be as distinct as Singenprins Fats are aleady attempking tis with Deep Learning and other types of AL systems, Fractal based paerning can be ust for tok trading bat could be much better suited 0 options trading where volaity prediction isthe main ‘objection, Maybe even replacing te curtent pricing model of Black Scholes, More From Medium Moneyball and Software Hedging with Machine Neural Networks for Option Development Learning, Pricing Cer Peale Perea Syren