Fractals are a popular tool among forex traders because they can help identify potential reversals in the market. However, calculating fractals can be confusing for new traders. In this article, we will explain how to calculate fractals forex and how to use them in your trading strategy.
What are fractals?
Fractals are a mathematical concept that describes patterns that repeat themselves at different scales. In forex trading, fractals are used to identify patterns in the price movement of a currency pair. Fractals consist of five bars or candlesticks, with the middle bar being the highest or lowest in the set. When a fractal is formed, it indicates a potential reversal in the market.
How to calculate fractals forex?
To calculate fractals forex, you need to follow these steps:
Step 1: Choose the timeframe you want to use
Fractals can be used on any timeframe, but it’s important to choose a timeframe that suits your trading style. If you’re a day trader, you might want to use fractals on a 15-minute or 30-minute chart. If you’re a swing trader, you might want to use fractals on a 4-hour or daily chart.
Step 2: Identify the highest and lowest price of the last five bars
To calculate a fractal, you need to identify the highest and lowest price of the last five bars or candlesticks. The middle bar should have the highest or lowest price.
Step 3: Draw a horizontal line at the middle bar
Once you have identified the middle bar, draw a horizontal line at the highest or lowest price of the middle bar. This line will be the fractal.
Step 4: Wait for confirmation
A fractal is not confirmed until the next bar or candlestick has closed. This means that you should wait for the next candlestick to close before making any trading decisions based on the fractal.
How to use fractals in your trading strategy?
Fractals can be used in a variety of ways in your trading strategy. Here are some examples:
1. Trend identification
Fractals can help you identify the direction of the trend. If a fractal is formed above the price, it indicates a potential downtrend. If a fractal is formed below the price, it indicates a potential uptrend.
2. Entry and exit points
Fractals can also be used as entry and exit points. For example, if a fractal is formed below the price and the price breaks above the fractal, it’s a signal to enter a long trade. If a fractal is formed above the price and the price breaks below the fractal, it’s a signal to enter a short trade.
3. Stop loss placement
Fractals can also be used to place stop loss orders. If you enter a long trade based on a fractal below the price, you can place your stop loss order below the fractal. If you enter a short trade based on a fractal above the price, you can place your stop loss order above the fractal.
Conclusion
Fractals are a powerful tool for forex traders because they can help identify potential reversals in the market. To calculate fractals forex, you need to identify the highest and lowest price of the last five bars and draw a horizontal line at the middle bar. Fractals can be used in a variety of ways in your trading strategy, including trend identification, entry and exit points, and stop loss placement. By incorporating fractals into your trading strategy, you can improve your chances of success in the forex market.
