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Fractals; an Assistant for Locating Swings

By , Forex Trading Instructor
11 November 2011 21:31 GMT

Fractals; an Assistant for locating Swings

By James Stanley

Traders looking to trade with market inflection points, or swing-highs and swing-lows can be doing so for a number of reasons.

Fractals_an_assistant_for_locating_swings_body_Picture_7.png, Fractals; an Assistant for Locating Swings

(Created with Trading Station 2.0/Marketscope)

Swings can best be characterized as market ‘inflection points,’ that are exhibited during the multiple changes in price that take place in almost every currency pair.

Rarely does a market make a clean move in one direction. Most down-trends are characterized by deeper ‘down swings,’ and smaller ‘up swings.’

Or up-trending markets can exhibit ‘swing-lows,’ as the market gyrates higher in the direction of the trend, although those swing-lows will often be at progressively higher prices, much like the chart below:

Fractals_an_assistant_for_locating_swings_body_Picture_4.png, Fractals; an Assistant for Locating Swings

(Created with Trading Station 2.0/Marketscope)

In our previous articles in the price action series (links available at the bottom of this article), we show numerous mechanisms that traders can use to identify trends, initiate trades, and manage positions using only price action on the chart.

Swings can best be characterized as market ‘inflection points,’ that are exhibited during the multiple changes in price that take place in almost every currency pair.

For traders looking to trade with swings, or traders looking to deepen their identification of market swings, the fractal indicator can be of great assistance.

Fractals are going to point out swings on the chart for us.

An ‘Up,’ fractal is going to be shown on candles in which the candle to the left and the candle to the right show us a higher value.

Fractals_an_assistant_for_locating_swings_body_Picture_1.png, Fractals; an Assistant for Locating Swings

(Created with Trading Station 2.0/Marketscope)

On the other hand, a ‘Down,’ fractal will point out those candles on the chart in which the previous and following candle display a ‘higher low.’

Fractals_an_assistant_for_locating_swings_body_Picture_2.png, Fractals; an Assistant for Locating Swings

(Created with Trading Station 2.0/Marketscope)

Fractals are already pre-built into the FXCM Trading Station 2 platform with the Marketscope charting package.

For traders looking to add fractals to their chart, they can do so by simply right clicking and choosing ‘Add Indicator,’ and the ‘Fractals,’ entry is available under the ‘Bill Williams,’ category of indicators.

Fractals_an_assistant_for_locating_swings_body_Picture_3.png, Fractals; an Assistant for Locating Swings

(Created with Trading Station 2.0/Marketscope)

Links to additional resources:

Price Action, an Introduction

Price Action Swings

Price Action Pin Bars

Support and Resistance lesson 1 (On-Demand Video Course)

DailyFX+ Trading Room

--- Written by James B. Stanley

To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX.

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mailto:Instructor@DailyFX.com

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11 November 2011 21:31 GMT