# Variation Index

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Nowadays, the most popular representatives of the fractal time functions are the financial time series. The fractal structure of these series is well-known and

aсcording to Mandelbrot there is a “rewording of the famous market saying that the movement of stocks and currencies is independent of the time scale and the

price. An observer can’t tell if the information refers to the weekly, daily or hourly changes just by looking at the appearance of the chart» [1].

Usually, to determine the fractal dimension the Hurst’s exponent is calculated [2]. However, for the reliable calculation of this exponent a huge amount of data

is necesary (~ 10^3) and that is too much comparing to the duration of the trends of trading.

The authors [1] interpose the fractal characteristics – the variation index (m) that is closely related to the common fractal dimension. In distinct from the

Hurst’s exponent, the amount of information that is necessary for index determination is less by a factor of 2. It leads to use it as a local characteristics for

determination of the dynamics of the price series. If m < 0.5, it can be interpretated as a trend and m > 0.5 – as a flat.

The suggested indicator calculates the variation index on a previous interval which is 2^n long. The “n” parameter is specified by the user.

The common rules of the indicator application are the following:

• If the value of the indicator is lower than 0.5 it means the trend state of the market.
• The extremely low value is often precedes the end (correction) of the current trend.
• If the value of the indicator is higher than 0.5 it means the flat state of the market.
• The extremely high value is often precedes the beginning of the considerable trends.
• If the value of the indicator is close to 0.5 it means an undefined state of the market.

Variation Index is a Metatrader 4 (MT4) indicator and the essence of the forex indicator is to transform the accumulated history data.

Variation Index provides for an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.

Based on this information, traders can assume further price movement and adjust their strategy accordingly.

How to install Variation Index.mq4?

• Copy Variation Index.mq4 to your Metatrader Directory / experts / indicators /
• Select Chart and Timeframe where you want to test your indicator
• Right click on Variation Index.mq4
• Attach to a chart
• Modify settings or press ok
• Indicator Variation Index.mq4 is available on your Chart