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Stalking the microstructure of chaos

On occasions a trader may need to turn up the microscope and look deeply into the chaos. For what? A micro-fracture, a microtrend or a small bubble movement that is like the flap of a butterfly’s wings – from which evolves a hurricane. This is the nature of chaos.

The chart below shows a small rising wedge down to the 5 min time frame. ‘We’ don’t know what will happen next. Rising wedges on any time frame tend to create a probability of reversal. We don’t know how far such a reversal will go – and we don’t care! [Probability means a greater probability. I’ve seen rising wedges not reverse at all.]

 

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