What are fractals?

Fractals are often associated with complex mathematics. In addition to recurring patterns, fractals can also refer to price movements that are more chaotic in nature.

Four or more bars are required to form a spiral. Fractals can be identified by the following rules:

• -Bearish turning points occur when a pattern has the highest high in the middle and two lower highs either side.
• -A bullish turning point occurs when there are three lower lows on either side of the middle low.

The two fractal patterns described above are both examples of perfect patterns. While there are other less perfect patterns that can appear, in order to qualify as a valid fractal, the basic pattern should remain intact. In this case, fractals are lagging indicators and have obvious disadvantages. It is only possible to draw a fractal on the second day of the reversal. Nevertheless, most significant reversals will continue to benefit traders for a longer period of time. A bullish fractal pattern follows a bullish uptrend, while a bearish uptrend follows a bearish downtrend.

Fractal-based strategy

Using the fractal-based strategy is quite simple. The results can be quite satisfactory while at the same time. Fractals may function as an indicator in Forex, but this strategy is indicator-less. Rarely does an indicator do the entire trading for the trader. There is no denying that there are many kinds of fractals.

How to detect fractals?

Five candlesticks make up the Fractal pattern. First, we have a fractal candlestick. It must have two more candlesticks that do not encroach on its borders to the right of it. The fractal is considered complete when two candlesticks form at its sides; if any of the candlesticks break the candlestick’s border, the pattern is considered erratic.

What is a fractal border?

There are upper and lower fractals. The upper border of a pattern must be not broken by candles placed right and left of it.

It seems quite sloppy at first glance. Each pattern is marked with a different color. There are five candlesticks in each square: a fractal one in the middle and two on either side, remaining within its borders. By doing this, I am showing you that a fractal candlestick of one pattern can easily be a side candlestick of another pattern. These indicators allow us to place a Stop Loss when the trend is clear. In general, you can calculate them yourself, and with some practice, you will be able to see them without indicators. I call this strategy an indicator-free strategy because it does not use any indicators.

Trading breakaways of fractals

The top characteristics of this strategy include:

• Timeframes: M30, M5
• Currency pairs: multicurrency
• Instruments utilized: Bill Williams’s standard Fractals

Detecting the trend

You should start by analyzing an M30 chart. Finding the last broken fractal is the first thing to do. You must point your entry point in the same direction in which it has been broken. (An example is shown on the chart.)

The upper broken fractal (surrounded by a red circle) is the last broken one you see. Red is the upper border of the price, broken by the red line. The situation suggests that an ascending move could be underway, so you might want to look for entries to buy.

Entry point

You need a correct entry point after making up your mind about the direction (an example will be used to illustrate an ascending move). Change over to M5 for this purpose. Overlay the current candlestick with a vertical line. Don’t worry about what’s to the right. We are waiting for a lower fractal to form to its left – focus only on it.

After it has been completed, draw a horizontal line on the border (low) and wait until the price breaks through it. Once the line has crossed the border, drag it back to the center and wait for a breakaway. Place a Buy Stop order at the border of the last upper fractal once the line is broken. It is recommended that a Stop Loss be placed based on the previously drawn horizontal line.

In addition, there are times when you need to move pending orders. If you encounter new upper fractals, the pending order must be raised to its highest. The same applies when shifting the SL: if a new lower fractal forms, the SL must be placed at its border.

Final words

In Forex fractal-based strategies, transferring positions to breakeven is the main objective. Check for new fractals at the side of the SL after the pending order has been triggered and the price has moved in the desired direction. Our example involves a buying trade, the Stop Loss is at the border of the last lower fractal, and the Stop Loss is dragged to the new one’s border as soon as it comes into being, and so on. Additionally, the pivot of the day can be the target; if a trade is carried over to the next day, the next pivot serves as the target.

Combining fractals with other measures and methods may be beneficial. A trader may use fractals in many different ways, as they are flexible enough to adapt to his or her particular situation. Fibonacci retracement levels are another option. An Alligator indicator is another. Fractals may appeal to some traders, but not to others. Trading success does not rely solely on them, and they should not be an exclusive focus.