Tuesday, 25 June 2019

How to Use Fractal Indicators in Trading

In the eyes of ordinary people, the movement of the price chart on the chart will most likely only be seen as an irregular random pattern. However, by using fractals (fractals), a reliable forex trader can predict in what direction the price will move in the future. How come? How can random patterns be predicted using fractals?

Practical Understanding and How to Use Fractals on Trading
Fractal theory is basically emphasized on repetitive patterns that traders can use to predict the direction in which prices will move. Thus, the actual price movement on the chart is a series of fractal patterns in which if a pattern appears then the pattern can be an indicator in which direction the next pattern will continue, and so on

Unfortunately, because we have to wait for the pattern to complete, the obvious disadvantage of how to use this fractal is the nature of the lagging. That is, we must wait for the confirmation of the next two bars before opening the position. It could be that the two bars will last two hours or two days, depending on our timeframe. Fortunately, a confirmed reversal of prices will usually last longer than the two bars.

The basic principle of how to use this fractal is exactly the application on the Elliot wave (Elliot Wave). The difference lies only in the process of identifying the patterns.

How to Use Fractals with Indicators
Fractal indicators have various functions, here are examples of some basic functions:

1. As a Trading Signal

Fractal indicators cannot be used only by puppets without the help of other indicators. In essence, so that the fractal indicator produces a valid trading signal, then you have to use another indicator as a confirmation or noise filter.

One confirmation indicator that can work well with the fractal indicator is the alligator indicator. The reference is quite simple;

The signal is buy valid if the peak is found above the "tooth" of the MA alligator line (the jagged red center line).
The sell signal is valid if the valley is fouREADnd under the "teeth" of the MA alligator line.

Also Read: The 3 Best Chart Patterns for Forex Trading
Also Read : Strategy Using Alligator Indicators

It should be noted, the combination of these two indicators cannot guarantee 100% success. Especially on ranging (sideways) market conditions. Note that fake signals can still occur even though they have followed the reference rules.

To reduce the risk of false signals, it is recommended to avoid the timeframe too low (below h1). Because the lower the timeframe, the invalid frequency of the bar noise appears to be bigger and too often, so the chances are that it will also confuse the accuracy of your trading signals. For this reason, practice using a combination of fractal indicators and alligator indicators on the H4 or D1 (daily) timeframe.

2. As A Tool To Find Trend Directions

Second, fractals can be used as a benchmark in drawing trendline lines, so you no longer need to be confused in determining which valleys (support) and peaks (resistance) are significant.

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