Forex fractals is one of the best indicators ever created. It clearly reveals wave structure of market which is often shattered and unstable due to the constant struggle between bulls and bears. Constant struggle creates price movement that makes forex trading possible.
This strategy was created by observing market and price action. Fractals indicator is the tool of visualisation, which eases the decision process of entering the trade and determining stop loss and take profit levels.
Each price movement in the forex (or any other market) is countered by traders with opposite market view (that are buying into the majority selling and vice versa), this creates price corrections – pull-back formations.
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Currency: any, prefer majors
Entry into the position:
By comparing size of the pull-back formation to the initial movement, we can determine power opposing current trend. Weak pull-back formation signalise trend health and is therefore good entry opportunity.
To measure and determine wave structure of the market with greater accuracy we use fractals indicator.
Significant movement, preferably into the new high or lows of the trend. This is clearly marked by two opposing fractals (grey arrows).
Subsequent pull-back formation has not reached middle of previous movement. 50 percent is the limit. When price reaches halfway through the previous movement it renders the signal invalid, as it signalises over involvement of trend opposing forces. Weaker the pull-back – stronger the signal.
We place pending buy order into the direction of the trend and breakout at the high/low of signal movement.
Two approaches for position liquidation can be effectively used.
A: Stop loss and take profit each equals pull-back formation size in pips.
B: stop loss equals pull-back formation, TP is aimed at scalping profit of 5 – 10 pips.