Benoit Mandelbrot is probably best known for fractals, self-similar structures. Here are charts of the S&P 500 over the last three months and over the last 13 years.
They both represent range-bound trading, in which the index goes up and down, but never establishes a trend. But the scale they occur on is vastly different. Interestingly, the ups and downs of the range within which the three-month chart is trading represent slightly more than the long-term annual average rise/fall of the market.
A trader, as opposed to a long-term investor, can make money in such range bound markets by buying low, selling high, and going short at the peak. Just taking the peaks and troughs between 112 and 120, a trader could makes something like 50% profit (exclusive of taxes) in three months. It’s like making seven years of normal profits in three months.
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