Forex Trading, Fractals and Spiritual Enlightenment
In Case You've Never Heard Of Fractals... I'll spare the mathematical aspects and get right to heart of fractals so you can use them in your trading as soon as possible. Imagine in your mind: the "fluffy" structure of a cloud, or the incalculable curves along a massive coastline. How would you go about measuring either of these? I'll tell you this, the irregular and complex characteristics of their shapes can't be measured in length or width. But with what legendary maths visionary Benoit Mandelbrot refers to as "roughness". What Do Clouds And Coastlines Have To Do With Trading... Nothing. But there is a critical link. The fractal nature of their structure provides valuable insight we can apply to other fractal phenomenon. Take for example this image of broccoli romanesco... Take a close look at the inside of the broccoli's stalk. The "branches" multiply out to more branches and those too expand out into more similar branches. This is a fractal structure and it appears all throughout biology and nature. At first glance the form appears elaborate, but upon closer observation the little branches are incredibly similar to the whole vegetable. The only difference is scale. Interestingly enough, fractals appear in the financial markets as well - it's as if they were an extension of nature themselves. Your probably wondering by now, what does this mean to me and my trading? You Trade Your Belief System And Your Brain Is A Fractal Structure... That escalated quickly didn't it? Before you reap the benefits of this penetrating insight, I'm going to walk you through the easy logic behind it. The conclusion assumes two premises. Firstly, the financial markets is driven by two psychological aspects of our fractal minds: fear and greed. This idea is commonplace among renown financial experts and traders. Secondly, the complex neural networks of our brains are indeed fractal structures, of which can be seen with high powered microscopes or fMRI. Now, if you have followed along this far - let's see how we can observe these fractals, or psychological footprints, as price action patterns on your chart (Finally!) This is a bearish fractal, it is composed of 5 or more bars and it occurs at a top. As you can see, fractals are repeating, easy-to-spot patterns that occur no matter how chaotic the market may be. This is a bullish fractal, it is composed of 5 or more bars and it occurs at a bottom. These are the most commonly identifiable fractals, others do exist however we will not cover them in this post. Fractals Give Entry After A Pullback Or Consolidation Zone... Fractals became an invaluable tool to my trading when I was looking for short term opportunities in a trading range using a Donchian Channel and especially in combination with a set of moving averages like the Alligator. In the image above you will see my customized 55 Period Donchian Channel on a GBPUSD 30 minute chart. The up arrows represent a bearish fractal and the down arrows represent a bullish fractal, which may have been confusing had I not described them earlier in the post. I've circled the entry fractals that the Donchian Channel filtered out of the many fractals that appeared. I am aware the most common setting for the channel period is 20 days, however, I find that during a non trending market 55 serves excellently on this time frame. What About Trend Following With Fractals... In this image you will see a variant of the classic Alligator I use in my Stop Sign Trading webinars on a Cable M30 chart. I find the great thing about using fractals with moving averages is that the trend itself serves as a powerful filter. In this example I've identified the trend is down, so I am only looking for bearish fractals to enter once price has made a pullback. After the fractal appears I set my stop loss and enter the trade in agreement with the overall trend. The most common settings for the moving averages of the Alligator are 13, 8 and 5 however these are not the settings shown in this example. Points To Remember About Fractals... Don't pay to have the fractal or Donchian Channel indicator for your charts! Nearly every platform has them installed in your charting software automatically. Fractals are by no means a perfect tool and aren't limited to entry confirmations. Many traders find them better suited for take profit or stop loss levels, but never traded by themselves as fractals are only a confirmation tool. It is important to know the overall trend, monitor news releases and manage your risk according to your own personal strategy. FULL RISK DISCLOSURE: All of the information in the above post is meant for educational purposes only and should not be taken as investment advice. Trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is no guarantee of future results.
Forex Fractal Strategy. The chart above gives you a very good idea of emerging patterns clearly visible for trades in the EUR/USD forex pair. Forex fractal strategy first came on to the forefront thanks to the efforts of Bill Williams who had a number of indicators as a part of his overall trading system, one of which was the Fractal Technical Indicator. Downloads: Forex MT4 2 line MACDOriginal fractals: Fractals_Original.mq4 Forex MT4 2 line MACDFractals code: Fractals.txt Fractals Indicator Forex Fractals sind Indikatoren, die den Tradern dabei behilflich sind, herauszufinden, wann sich eine Trendumkehr im Markt abzeichnet. Mittels Fractals Trading lässt sich bestimmten, in welcher Richtung sich der Kurs mit großer Wahrscheinlichkeit bewegen wird. Dieser Indikator ist ein technisches Analyse-Instrument, das Hochs und Tiefs anzeigt. Fractals werden mit Candlestick-Charts verwendet ... Fractals - an indicator introduced by Bill Williams. Simple and versatile, fractals can be used as a stand-alone indicator or in combination with other Forex indicators. Bill Williams also gives us his approach to using fractals in trading, which we are going to highlight here as well. Fractals could be added to the strategy: the trader only takes trades if a fractal reversal occurs near the 61.8% retracement, with all the other conditions being met. The chart below shows this ... Den Fractals Indikator finden Sie auf der linken Seite des MetaTraders im Navigator-Fenster unter den Bill Williams Indikatoren. Auf dem folgenden Screenshot ist das zu sehen: Quelle: MetaTrader 5 Navigatorfenster, Fractals Indikator. Ein Klick auf "Fractals" öffnet das Dialogfenster für den Fractals Indikator. Der Zweck des Indikators ist es ... Fractals Forex Trading Strategy Fractal trading is only one of the evaluation methods which is effective during the periods of a stable trend, while in a wide flat can be unprofitable. It is necessary to understand that the fractals trade strategies were initially developed for the stock market which was less volatile and more predicted. Fractals tend to be more reliable indicators of direction when used with longer time frames than with shorter time frames. Using fractals for stop loss placement. Traders also often use fractals to decide where to place stop-loss orders. For example, when entering a short position you can use the most recent up fractal to place your stop loss. Traders usually use the tip of the actual fractals ... Fractals are just five-bar reversal patterns. It’s important to learn about fractals and how they can be applied to your trading strategy. Fractals can also refer to any recurring patterns that happen amid larger and more chaotic price movements, and that is what happens during Forex trading. Intro to Fractals in Forex
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