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Polarized Fractal Efficiency (PFE)

Polarized Fractal Efficiency (PFE)
TradingTechnical AnalysisTechnical Analysis Basic Education

What Is Polarized Fractal Efficiency (PFE)?

The term polarized fractal productivity (PFE) alludes to a technical indicator that is utilized to determine the price efficiency for an investment over a client characterized period. It vacillates between - 100 and 100 where the centerline is at zero. Traders can utilize the PFE to see where a security they're keen on is going. The price shows a vertical trend on the off chance that the PFE goes over zero and a descending trend assuming it dips under zero. The indicator was developed by creator, engineer, developer, and trader Hans Hannula.

How the Polarized Fractal Efficiency (PFE) Works

The polarized fractal productivity indicator was developed by creator, engineer, developer, and trader Hans Hannula. The thought was first referenced in 1994 in the January issue of Technical Analysis of Stocks and Commodities magazine. It varies between - 100 and +100, with zero as the centerline. Securities with a PFE greater than zero trend up, while a perusing of under zero shows a descending trend.

The PFE indicator measures the strength of a trend by its position relative to the zero line. When in doubt, the further the PFE value is away from zero, the stronger and more efficient the given trend is. A PFE value that vacillates around the zero line could demonstrate that the supply and demand for the security are in balance and the price might trade sideways.

Strategies that generally utilize the PFE as a signal consider a buy sign as a reversal toward the indicator and its movement from its base value to zero. A signal to close a position emerges as the value of the indicator arrives at its top over zero. An indicator shift from top to zero presents a sell signal. As a rule of thumb, traders ought to buy to cover all short positions after the indicator forms another base.

The PFE indicator likewise surveys the strength of a market trend. Accordingly, the higher the indicator value, the stronger the trend. This means 100 shows a strong uptrend, while a value of - 100 demonstrates a strong downtrend.

The signature characteristic of the PFE is its utilization of fractal calculation in determining how efficiently a security's price is moving.

Formula for Calculating Polarized Fractal Efficiency (PFE)

Pi=100 × (Pricei−Pricei−N)2+N2∑j=0N−2(Pricei−j−Pricei−j−1)2+1if Closei<Closei−1P=−PPFEi=EMA(Pi,M)where:N=period of indicatorM=smoothing period\begin &P_i=100\ \times\ \frac{\sqrt{(\textiti-\textit)2+N2}} {\sum^\sqrt{(\textit-\textit_)^2+1}}\ &\textiti<\textitP=-P\ &PFE_i=EMA(P_i,M)\ &\textbf\ &N=\text\ &M=\text \end

The polarized fractal proficiency isn't a predictor. Rather, it reflects how the price has acted in the past.

Special Considerations

Hannula's work continues in the strides of Benoit Mandelbrot, whose work as a mathematician and contemporary polymath finish in his now scandalous book, The Misbehavior of Markets: A Fractal View of Financial Turbulence. Mandelbrot's 2006 book has proceeded to score armies of adherents for its progressive reexamination of the standard instruments and models of modern financial theory.

Its reason is richly caught through fractal calculation for financial market applications. Hannula's and Mandelbrot's research has brought the genuinely necessary study of turbulent systems to financial systems. Progressively, participants perceive that Chaos Theory and nonlinear connections are critical drivers of investment behavior.

Polarized Fractal Efficiency (PFE) Example

The PFE indicator created a buy signal in American Tower (AMT) on July 30, 2019, when it switched from its base close to zero. In this way, the indicator created a signal to close positions when it arrived at its top over zero on Aug. 12, 2019.

The people who traded the PFE indicator in this specific model made $13.34 per share, or 6% ($221.02 sell price, $207.68 buy price). Likewise with every technical indicator, traders ought to involve PFE related to different forms of technical analysis.

Features

  • PFE utilizes fractal calculation to determine how efficiently a security's price is moving.
  • The indicator, which was developed by creator and trader Hans Hannula, was first referenced in a 1994 issue of Technical Analysis of Stocks and Commodities magazine.
  • PFE assists traders with determining the bearing and strength of a trend.
  • It likewise helps traders determine and survey the strength of a market trend.
  • Polarized fractal productivity is a technical indicator that determines price proficiency over a client characterized period.