Profitable Chart Pattern is the technical tool in detecting turning point when you trade in Forex and Stock market. Fractal wave is our specialized microscope in studying the profitable chart patterns in the financial market. Then you might be curious why turning points or zigzag price patterns happen fundamentally. This is an important question in our trading. To answer the question, we need to understand a underlying theory behind the Profitable Chart Pattern, which is known as Fractal Wave.
Fractal or Fractal wave is commonly observable in nature like in snowflake, in tree leaves, in heartbeat rate, and in coastal line. Hence, many traders believe that identifying profitable patterns in price series are the same as spotting natural order or regularity. By definition, Fractal wave is infinitely repeating self-similar patterns in time domain. The main regularity in Fractal wave is the shape of the pattern. Typically, this shape of pattern is referenced for some geometric shapes like triangle, circle, square, etc. In Fractal wave, we can have both strict self-similar and loose self-similar patterns. If the repeating patterns have the same geometric shape and all individual patterns have matching parameters in that shape (i.e. ratio of width to height in rectangle or angles of triangle), we call this as strict self-similarity. If repeating patterns have the same geometric shape but majority of individual patterns have non-matching parameters in that shape, then we call this as loose self-similarity. Fractal wave in Forex and Stock market price series have triangle as the geometric shape. However, individual triangle can be wider, narrower, longer, and shorter than other triangles. Hence, Fractal Wave in Forex and Stock market data possess the loose self–similarity. Loose self-similarity does not mean that all the triangles are non-identical in shape. Even in loose self-similarity, we can have some triangles in identical shape or at least within allowed range in precision.
First important characteristic of fractal wave is the infinite scales. In theory, repeating triangles in forex and stock market can have infinite variation of scales from very small to extremely large triangles. For example, one day we can observe one triangle formed in thirty seconds but another triangle in same shape can be formed in thirty days. In our pattern study, scale is an independent factor. As long as triangles are identical in shape, or within allowed range in precision, triangle formed in thirty seconds is treated as identical to the triangle formed in thirty days, regardless of their size. For some practical example, Fibonacci price pattern with 61.8% retracement formed in twenty-candle bar in hourly timeframe is an identical pattern to the other 61.8% retracement pattern formed in thirty six candle bar in daily timeframe. Hence, we use Fibonacci price pattern with 61.8% retracement to make buy and sell decision across all timeframe.
Second important characteristic about Fractal wave pattern is that many small pattern are jagged together to make a bigger pattern. For example, in triangular fractal wave as in financial market, one bigger triangle can be formed from many small triangles. In our pattern study, we often seek this sort of jagged patterns for our trading opportunity. Especially, in Harmonic pattern, Elliott Wave patterns, and X3 patterns, this sort of jagged pattern are commonly utilized to find the profitable patterns with good success rate.
Recognizing Chart Patterns is the valuable skills for your trading. These Chart Patterns can help your trading immensely but in different angles from the technical indicators. Of course, you will need some guidance before you can apply these profitable Chart Patterns for your trading. Consider to take some time to practice trading with these Chart patterns. This could become the game changer for your trading career. If you want to become successful trader, you need both knowledge and practice on how these Chart Patterns works for your trading. You can use them together with fundamental data if you wish.
We do have some automated tools in detecting these profitable patterns for your trading too. Below are the links to the two of these automated profitable pattern detection indicator for your trading designed in Metatrader 4 and MetaTrader 5 platform.
In addition, you can find the book explaining some basics of these chart patterns. Below are the links to the book: Profitable Chart Patterns in Forex and Stock Market: Fibonacci Analysis, Harmonic Pattern, Elliott Wave, and X3 Chart Pattern. It is available from major book distributors.