Mathematics and parameters
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Info tradingstrategyguides. Facebook Twitter Youtube Instagram. Fractals are a very useful FX trading tool and technique: They provide a safe entry method. Even more important; they also provide places for great stop losses. Fractals are natural support and resistance levels.
Fractal — Trend Analysis — Indicators and Signals — TradingView
Fractals can be useful for the placement of Fibonacci retracement levels. Fractals are an excellent method of determining the trend without bias. Fractals base on either chaos theory or mathematics. In chaos theory, the market is fractal in nature: Fractal, in nature, means that the market makes the same or similar movements on all time frames. These recurring patterns seem random, but they do have an order to them. This is explained by the Elliott Wave Theory. In simpler terms, chaos has ordered it on a higher scale. Fractals may be the same at every scale. The fractal qualifies when this happens: The Fractal Technical Indicator is a series of at least five successive bars.
The reversing set is a series of at least five successive bars. The fractals have High and Low values. They are indicated with the up and down arrows.
Why Fractal Indicator Is Critical for Trading
A word of caution is: On live charts, fractals can appear on the chart with one candle to the right. A fractal with one candle to the right of it is an unconfirmed fractal. It will disappear from the chart if price pierces through that level. Therefore a trader must wait for two candles to the right. Then the fractal will always appear on the chart. The Purpose of Using Fractal Indicators Supported by chaos theory and other mathematical principles, the purpose of using fractal indicators is to identify when these breakouts have actually begun to occur.
Here are some extra Forex tips and words of caution as well when using the Fractal indicator.
The higher the time frame, the more importance and reliability can be subscribed to any fractal The larger the period, the lower the number of signals generated Plotting and analyzing fractals in multiple time frames is very useful. The long—term chart can be a great filter for short-term fractals Fractals can be great to use for trail stops. The trail stops can, in fact, be used on all time frames, but they have more value or strength on higher time frames. Using two fractal levels distance instead of 1 would give more breathing space to the trade.
Conclusion Fractals are extremely useful Forex tools. We hope you had a great trading week! And we wish you a fantastic Friday and weekend as well. Good Trading! Thank you for reading! Also, please give this strategy a 5 star if you enjoyed it! Author at Trading Strategy Guides Website.
Fractal Indicator Definition and Applications
Crystal Ong says:. Usually a trader deals with only with different «fractal models», but the principle of their construction and interpretation of signals is preserved. The construction logic allows for extremums to be inconsistent within the pattern, and the key bar does not need to be in the center. If in a fractal there are two key bars max or min , then for search of point of entry is considered only last «fresh».
There are also techniques for analyzing «incomplete» fractals of three or four candles, but they are recommended only for experienced traders because of the large number of false signals. The longer the period of formation of fractal structure, the more reliable the trading signal given by it.
For example, if Fractal Forex indicator shows breakdown of a fractal on a timeframe D1 or W1 is a more reliable signal than at a period of H1 or less. Breakdown of the upper or lower boundary of an already formed fractal often causes the appearance of the next fractal in the same direction. This means that the current trend at least! Continues, and is likely to intensify. Emergence of a fractal means the strong turned impulse confirmed by the preliminary movement when forming all construction.
The strongest signal appears immediately after the formation of the fractal. The same group of candles can be used for both upper and lower fractals. The limit of the upper fractal is the maximum of the arrow above the key bar, the lower one is the minimum of the arrow. In case of formation of an opposite fractal the current trading signal is cancelled. Signals of fractals indicators can be good reference points for placing StopLoss orders, especially on older timeframes.
The following two conditions must be observed.
We set StopLoss only at the level of the last fractal. The upper shadow is used for transactions for sale, the lower one for buying. Strategy of trading Fractal indicator is based on conjoint analysis of fractals and a trend line. Fractals have to show the moment of the beginning of new price dynamics and point of entry , the balance sheet line reflects development of a trend and its termination exit point.
It will allow not only to evaluate the current trend, but also to evaluate «truth» of fractals, and also possible levels for StopLoss see here. We will review two classical examples. Fractals should always be confirmed and filtered by other technical tools, and, naturally, Williams recommends using Alligator.