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1. Fractals are five candle reversal candlestick patterns.
2. They are lagging indicators.
3. Should be used in conjunction with other indicators.
4. Standard technical analysis rules apply: longer timeframes tend to be more accurate, and use of multiple timeframes can help reduce false signals.
Every trader should embrace the following seven words: I don’t know what will happen next
This isn’t meant to disregard your analysis but tell a simple fact about trading. Anything can happen in the market place and an infinite number of possibilities are plausible. As a trader, we can develop a strategy with set rules that work with our psychology to give us an edge but it will not predict the future. Therefore, we can use fractals as a trigger to put us into a trade or out of a trade and we may not know if the trade will end in a profit but we can now that we’re only acting on objective evidence.
2. They are lagging indicators.
3. Should be used in conjunction with other indicators.
4. Standard technical analysis rules apply: longer timeframes tend to be more accurate, and use of multiple timeframes can help reduce false signals.
5. Ultimately, fractals are basically the same concept as swing points.
How Traders Can Use Fractals
Volatility is a key determinant to trading opportunities. One of the common triggers that volatility is in play is when a prior high or low is taken out and a new trend begins. Fractals can be applied to the chart so that you can see when a recent key level has broken which can lead to a price-action trading opportunity.
Every trader should embrace the following seven words: I don’t know what will happen next
This isn’t meant to disregard your analysis but tell a simple fact about trading. Anything can happen in the market place and an infinite number of possibilities are plausible. As a trader, we can develop a strategy with set rules that work with our psychology to give us an edge but it will not predict the future. Therefore, we can use fractals as a trigger to put us into a trade or out of a trade and we may not know if the trade will end in a profit but we can now that we’re only acting on objective evidence.