Mandelbrot's Generator by Jay Norris
When I first read a book titled The (Mis)Behavior Of Markets, I was not sure if I had wasted my time. I did dog-ear a page and wrote a single note on another. I reread the book several years later, which was fortunate, because I got another, new impression of what author Benoit Mandelbrot called a “generator,” which defines the base component, or characteristic, of price movement.
The generator was such a completely simplified tool that Mandelbrot gave himself a professional caveat before introducing it, saying it was so uncomplicated that he hesitated to call it a “model,” instead calling it a “cartoon.”
The generator is a straight line with a zigzag placed over it (Figure 1). The straight line represents the trajectory of price over time, while the zigzag provides a model for price pattern. The pattern created by the generator is scalable, and fractal in nature in that it both reproduces itself in like form based on the larger time frame pattern and it creates or “generates” smaller patterns of itself on the lower time frames (Figure 2). A fractal is a pattern or shape whose parts echo the whole; and the smaller that part or pattern, the more complex the construction.