Fractal

AAA

DEFINITION of 'Fractal'

A type of pattern used in technical analysis to predict a reversal in the current trend. A fractal pattern consists of five bars and is identified when the price meets the following characteristics:

1. A shift from a downtrend to an uptrend occurs when the lowest bar is located in the middle of the pattern and two bars with successively higher lows are positioned around it.

2. A shift from an uptrend to a downtrend occurs when the highest bar is located in the middle of the pattern and two bars with successively lower highs are positioned around it.

INVESTOPEDIA EXPLAINS 'Fractal'

Fractal signals are most useful when used in conjunction with other technical indicators, such as Fibonacci retracement or various moving averages. It should be noted that this is not a widely used indicator, so it may not be available for every type of charting application. But various third parties have developed various plug-ins which make using fractals possible.

RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth ...
  3. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support ...
  4. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  5. Reversal

    A change in the direction of a price trend. On a price chart, ...
  6. Pattern

    In technical analysis, the distinctive formation created by the ...
RELATED FAQS
  1. How effective is creating trade entries after spotting a Fractal pattern?

    Fractal trading theory – based on some of the same principles of chaos theory – contends that the market makes similarly ... Read Full Answer >>
  2. How do I build a profitable strategy when spotting a Fractal pattern?

    Fractals are a mathematical concept based on geometric structures that develop within larger phenomena. They can be used ... Read Full Answer >>
  3. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  4. Does stockholders equity accurately reflect a company's worth?

    Stockholders' equity is one method to evaluate a company's worth. It tends to work better for companies in established industries ... Read Full Answer >>
  5. How can I spot trading opportunities looking at year-to-date (YTD) performance?

    Trading opportunities on the long side can be spotted by looking at stocks with the worst year-to-date (YTD) performance, ... Read Full Answer >>
  6. What are common growth rates that should be analyzed when considering the future ...

    Some of the most common growth rate metrics that investors and analysts consider in evaluating a company's future prospects ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Retracement Or Reversal: Know The Difference

    Learn to distinguish between a temporary price change and a long-term trend.
  2. Forex Education

    A Trader's Guide To Using Fractals

    This reversal pattern can make sense of the seeming randomness of market movements and improve your trading.
  3. Active Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
  4. Chart Advisor

    Stocks Breaking to Downside - Time to Sell?

    These stocks have broken patterns or trendlines to downside, indicating more selling could be coming.
  5. Chart Advisor

    3 Ways To Trade The Bounce In Coal

    News from the Supreme Court has caused active traders to turn their attention to the coal markets. We'll take a look at how to trade the bounce.
  6. Chart Advisor

    How Investors are Profiting from Cyber Crime Fear

    An ETF that has seen significant gains this year in the growing field of cyber security, and the threat and fear of cyber attacks and cyber crime.
  7. Fundamental Analysis

    Are Fast-Casual Restaurants Overvalued?

    Can fast-casual restaurants actually grow to the levels that investors believe they can?
  8. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  9. Technical Indicators

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  10. Chart Advisor

    3 Ways To Trade Oil's Move Lower

    The spot price of oil is facing major resistance. We'll take a look at a few products that you can see to profit from the move.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!