Fractal analysis is a difficult tool to use in the foreign exchange market and will suit an experienced trader rather than a novice. This technology is used in predicting the movement of prices in one direction or another, and therefore pricing and market movement will not surprise the trader with unpredictability.
The first to describe the principles of fractal analysis was Dr. Bill Williams, who compared market processes with absolutely incomparable trends, such as Brownian molecular movement, blood movement or cotton prices. In his opinion, the market is chaotic, and therefore it is impossible to focus on indicators that are based on linear functions. Stability in the market seemed to him temporary, whereas exactly the chaos actually led the market.
From the Latin meaning of the word means brokenness. Fractal analysis reasonably builds conclusions not on straight lines, but on wavy lines. This is due to the fact that the market never works according to a clearly defined scenario, and fluctuations in quotations cannot be avoided. That is, the Fractal is a computer-simulated model that describes a recurring market structure using graphs.
When working with this tool, you need to keep in mind the factors that shaped the price in a specific period of time. If during the analyzed period the main political, economic or social factors coincided, then we can assume the price behavior now, similar to the behavior in the previous period. The disadvantage of this method is that the trader should not only be well versed in analytics and data reliability at the moment, but also remember well similar events in the past. However, the effort spent on processing and storing information will be repulsed when, under certain circumstances, a trader can predict market behavior, while other traders will react to the trend only after it starts moving in one direction or another.
To begin with, a trader can try his hand on a single currency pair, since the number of factors affecting it is limited. After trying to model the trend in the market for this pair, you can analyze what was not taken into account, why the forecast was not justified, etc. A positive result is the fact that the trader was able to understand the market trend before it became clear to other market participants.
To summarize: the tool is difficult to use and understand. Experienced traders use it in conjunction with Elliott’s waves, because fractals are the beginning or ending of waves. However, such aerobatics, which is beyond the power of many ordinary players in the foreign exchange market, can bring significant profits due to the ability to predict the situation before the others. It is enough to practice on a separate example, to accumulate experience and time spent, means and efforts will be repulsed a hundredfold by income in the foreign exchange market. Good luck in mastering the most effective tools of Forex.