Fractals refer to reoccurring patterns in the midst of major price movements. The fractal indicator identifies turning points in the market that can be found around the central points of support and resistance. With the fractal strategy, forex traders can get an idea of where the trend is heading when a fractal occurs at these key levels. Fractals are very common and commonly used as part of a wider forex strategy with other indicators.
The fractal pattern itself consists of five candle tips and indicates where the price movement up or down was difficult. A fractal must have a central candle that has a higher high or a lower low than the two candles on each side.
In a rising fractal, the focus is on the highest candle, with a descending fractal on the bottom candle. A forex strategy based on the fractal indicator would provide for a trade as the market evolves beyond the high or low of the fractal signal.