Fractals are the primary tool used in Bill Williams chaos trading strategy. When Bill developed his Chaos trading method, binary options were not even invented. However, we can still use Fractals to profitability trade the binary options market.
Where to Find the Fractals Indicator?
Fractals are offered for free as a built in technical indicator in the popular MetaTrader 4 trading platform. If your broker does not offer the MetaTrader 4 platform, you can still download any Forex broker’s platform, open a free demo account with them and get access to the 1 minute (60-Seconds) chart in order to utilize the Fractals indicator.
Now that we have resolved how to find the Fractals indicator, let’s discuss how to use it to profit in binary options.
Preparing the Chart for using Fractals
The Chaos method is a very complicated strategy that involves 5 different technical indicators and a lot of trend analysis. Since we are going to apply this on a 60-second chart, we wouldn’t necessarily have ample time to analyze all the different parameters of the Chaos method due the fast moving price action in such small time frame. Hence, we will simplify the system and use it with a single moving average.
Once you have logged into your MT4 account, add the Fractals indicator from the list. Then, add a second indicator, Moving Average. The settings for the Moving Average indicator should be Period 5, and Apply to would be: Close.
Now, 1M chart should look similar to this, depending on which Forex pair you are about to trade (we are using it on GBP/USD):
Trading the Fractals with Moving Average
As we are huge fans of following trends, the Fractals indicator blend in nicely with our way of trading.
When a Fractal forms, it indicates Resistance in an uptrend (the Fractal points upwards) and during a downturn; it indicates Support (the Fractal points downwards). A price penetration above the Up or Down Fractal signals continuation of the trend in the respective directions.
On top of that, you should place your trades in the direction of the moving average. Meaning, if the price is above the 5 period moving average, place only CALL orders, and when the price is trading below the 5 period moving average, consider only PUT orders.
On the sample chart above, all the Blue lines are signal points.
When price penetrates below a Fractal, it indicates that the price will remain below this level for the next minute or two. At this point, you should place a PUT order with your binary options broker.
By contrast, when the price penetrates above the Fractal, it indicates that the price will remain above this level for the next minute. So, you should place a CALL order with your binary options broker at that point.
It’s a very simple 60-second strategy with a high win rate and you should try it on a demo account for a few days in order to gain confidence in this binary options strategy before investing in a real account.