Fractals are a common term used in the world of forex trading. They are a type of technical analysis tool used by traders to predict price movements. Fractals are used to identify patterns in price movements that can help traders make more informed decisions about when to buy or sell a currency pair.
A fractal is a geometric pattern that is repeated at different scales. These patterns can be found in nature, such as in the branching of trees or the formation of clouds. In forex trading, fractals are used to identify patterns in price movements that repeat at different scales.
Fractals are created by a series of five or more consecutive bars. The first two bars must be lower or higher than the remaining bars. The highest or lowest point in the series is known as the fractal point. If the fractal point is higher than the two preceding bars, it is a bullish fractal. If the fractal point is lower than the two preceding bars, it is a bearish fractal.
Fractals are used to identify support and resistance levels. Support levels are areas where the price is likely to bounce back up after reaching a low point. Resistance levels are areas where the price is likely to fall back down after reaching a high point.
Fractals can also be used to identify trend lines. Trend lines are used to identify the direction of the trend. An upward trend line is created by connecting the fractal points of a series of bullish fractals. A downward trend line is created by connecting the fractal points of a series of bearish fractals.
Fractals can be used in conjunction with other technical analysis tools to help traders make more informed decisions. For example, fractals can be used in conjunction with the moving average to identify trends. If the price is above the moving average and there are bullish fractals, it is a good time to buy. If the price is below the moving average and there are bearish fractals, it is a good time to sell.
Fractals can also be used to identify entry and exit points. If the price is above a bullish fractal, it is a good time to buy. If the price is below a bearish fractal, it is a good time to sell. Traders can also use fractals to set stop-loss orders. If the price falls below a bullish fractal, it is a sign that the price may continue to fall, and it is time to cut losses.
In conclusion, fractals are a powerful tool for forex traders. They can be used to identify patterns in price movements that can help traders make more informed decisions. Fractals can be used to identify support and resistance levels, trend lines, and entry and exit points. They can also be used in conjunction with other technical analysis tools to create a comprehensive trading strategy. By using fractals, traders can increase their chances of success in the forex market.
