Trading during a consolidating or ranging market can be challenging, but using fractals and moving averages can help identify potential breakout or reversal points. Fractals, a concept introduced by Bill Williams, are price patterns that indicate minor highs and lows, often signaling potential turning points in the market. In a ranging market, fractals can help traders spot key support and resistance levels where price may reverse. When combined with a moving average, which smooths out price action and defines the market's direction, traders can filter out false signals—only considering fractal breakouts that align with the moving average's slope or position.
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A common strategy is to use a slower moving average, such as the 50-period or 200-period, to confirm the overall range-bound conditions. If price oscillates around the moving average without a clear trend, it suggests consolidation. Traders can then watch for fractal breakouts above or below key levels, using the moving average as a reference for potential mean-reversion trades. For example, if price approaches the upper fractal resistance and the moving average is flat, a short trade with a stop above the fractal high could be considered. Conversely, if price nears a lower fractal support, a long trade with a stop below the fractal low may be viable.
Risk management is crucial when trading ranges, as false breakouts are common. Traders should wait for confirmation—such as a close beyond a fractal level with increased volume or momentum—before entering a trade. Additionally, combining fractals and moving averages with other indicators, like the Relative Strength Index (RSI) or Bollinger Bands, can further improve accuracy. By focusing on high-probability setups where fractals and moving averages align, traders can navigate ranging markets more effectively while minimizing losses from whipsaws.
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Risk Disclaimer:
Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.
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A common strategy is to use a slower moving average, such as the 50-period or 200-period, to confirm the overall range-bound conditions. If price oscillates around the moving average without a clear trend, it suggests consolidation. Traders can then watch for fractal breakouts above or below key levels, using the moving average as a reference for potential mean-reversion trades. For example, if price approaches the upper fractal resistance and the moving average is flat, a short trade with a stop above the fractal high could be considered. Conversely, if price nears a lower fractal support, a long trade with a stop below the fractal low may be viable.
Risk management is crucial when trading ranges, as false breakouts are common. Traders should wait for confirmation—such as a close beyond a fractal level with increased volume or momentum—before entering a trade. Additionally, combining fractals and moving averages with other indicators, like the Relative Strength Index (RSI) or Bollinger Bands, can further improve accuracy. By focusing on high-probability setups where fractals and moving averages align, traders can navigate ranging markets more effectively while minimizing losses from whipsaws.
Trade On Pocket Option: http://pocketoptioncapital.com
We're currently in our 13th year helping traders become successful in the live markets so we know a thing or two about leveraging a small account into serious wins.
Open Account: http://pocketoptioncapital.com
Risk Disclaimer:
Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.
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LearningTranscript
00:00back with another trading video. And today what I'm going to be sharing with you is a
00:07trading strategy that takes advantage of a consolidating market, a ranging market in
00:18other words. Like for instance on this Aussie dollar Japanese yen here, what we're looking at
00:23is there's no clear trend here. As you see, it's going back and forth, no clear bullish or bearish
00:32trend. So I found a little strategy where you can make money trading on the platform pocket auction
00:42basically using two indicators. And the two indicators that I'm using are the fractal,
00:50fractal indicator here, right here, and the moving average. And so what I've done is we're going to
01:04keep the default settings on the, well the fractal, we're going to set the period to two, which I
01:11believe is a default setting. And if you want to change the style of the pixels, you're free to do
01:20that. I can see the, the line, the lines, the arrows and the moving average indicator. We're going to set
01:32it to a period of 12 SMA. And of course you can also change the pixels here. Um, I have it at one
01:39pixel, which is good for me. And I'm able to see, uh, you know, the, up in the, the green and the red
01:49arrows here. So basically what we're looking for is when the market is consolidating or ranging like
01:57this, it tends to hit, go back to the, the moving average. So for instance, here, what we're going to
02:04do is we're going to wait for a signal, uh, a fractal signal. And then what we're going to do is
02:14take a trade in the direction of the fractal. Now, like I mentioned, this only works during a, uh,
02:21a consolidating or arranging market. And if we, let's go and take a look at some other currency pairs
02:30like this, even here, for instance, um, another reason why I'm using this strategy is because the,
02:38the markets have closed. It's five o'clock Eastern standard time. And so the regular markets have, uh,
02:46regular foreign markets, forex markets have closed, closed and only OTC is available at this time.
02:54And so there's really not a lot of movement, uh, in the OTC markets as well. When the markets are
03:04closed, the OTC markets sort of behave like the regular markets here. As you can see, there's a lot
03:09of ranging going on, not, not much of, uh, not much, uh, trending, uh, currencies here. Um,
03:21all right. This is a little bit trending, but as you can see here, the market is kind of trying to,
03:27uh, starting to consolidate Aussie dollar, Japanese yen, which was where we were just at.
03:32Also, what we're going to do is, um, I have the candle set to one minute
03:38and I've set our trade time to three minutes here and set it. All right. So we're going to,
03:49so we're looking at one minute, one minute candles, uh, while taking three minute trades.
03:57So what we're going to do is sort of scour all these different currency pairs and
04:05all right, like this, I would stay away from some, well, now it's starting to consolidate here.
04:13It was trending upwards and this strategy doesn't work when, when the market is trending like this.
04:21It only, like I mentioned, works, uh, when the market starts to consolidate. So we'll tend to stay
04:27away from currency like this. Now this good, this is another good currency pair. Um, as you can see,
04:34it's consolidating here, nothing really happening. All right. So it looks like this fractal. All right.
04:41We just created a fractal here. So I'm going to take a call trade. The fractal, just as I came upon
04:48upon this currency pair, see the red, there's a red fractal over here and that tells us to take an up
04:58trade. All right. So taking a three minute trade and I'm going to, I'm going to pause the video
05:09for a little bit. And then just before the trade, uh, expires, we'll, um, we'll come back.
05:22Okay. So I'm back in the trade is about to expire in about 10 seconds here and
05:29five seconds.
05:33Okay.
05:39Okay. So that trade one. Okay. So we won that trade. And so let's go around and look for another
05:53setup. Uh, just caught that just in time as the fractal was formed. Um, here, this particular
06:04currency pair is sort of trending downwards. So we want to avoid it. We're looking for
06:09ranging pairs. Pairs that are just, there's no trend, identifiable trend.
06:19This is an example here. Canadian Swiss franc. Uh, a fractal already formed. So we missed that.
06:28Um, let's see if we can find something that's, uh, we want to stay away from this. Um, it's kind
06:50of ranging very tightly here. So let's, um, okay.
06:59Here's something that might be interesting. Uh,
07:06let's see if we can get a, uh,
07:10green fractal to form. It's a little bit of patience.
07:14Uh, oh, no, a green fractal already has formed here. This is a red, this is a fractal, this
07:24fractal formed after. So let's find another pair. Okay. Yeah. We want to avoid, we want
07:33to avoid trending markets. Okay. With that, avoid that.
07:44This is a good strategy because a lot of times you'll find that the markets, you know, they're
07:52not really trending.
08:14they're not really trending. Okay. Okay. So let's go back to, let's see.
08:44All right. What I'm going to do is I'm going to pause the video. And when I get a new fractal
09:00that just formed, we're waiting for is a fractal to form. All right. We have a red fractal here.
09:06Um, next fractals will be a green fractal.
09:17So we're waiting. Uh, but I'm going to pause the video and, um, I don't want to hold everybody
09:24waiting for the next fractal form. And when I find a setup, I'm going to come right back. All right.
09:30Wait a minute. Let's see here. What we have here. Okay. It's fractal right when I'm thinking
09:45everything is consolidating because the markets are closed. So now we want not all these pairs,
09:52they want to travel in a different, in a trend we're going to do is I'm going to look for a, um,
10:13currency pair where it's definitely consolidated. Okay. Here we're going to sit on this Canadian
10:19Swiss franc pair. All right. And all right. A red fractals already, because you see here,
10:26it's, this is what we're looking for. This kind of setup here where there's no clear trend.
10:33And so what I'm going to do is I'm going to wait for that red fractal already formed. So we'll wait,
10:38we're going to wait for a, uh, a green fractal, which is the next fractal. And, um,
10:44let me pause the video, wait for, I'm going to sit on this pair and wait for the fractal to form and
10:53then come back and make the trade and do a trade. Okay. So I came back and just when the fractal formed,
11:05I took the trade, but the fractal disappeared, which was kind of weird, but
11:15the formation of the fractal showed me that there was a trend reversal coming.
11:21So I went ahead and took the trade and, um, the trade is currently in our favor.
11:25So let's see here, how much time we have left on the trade, about a minute left in the trade.
11:38Okay. So, uh, and there goes a fractal. Now it just formed, but it had formed
11:44earlier when I took the trade up here. And so let's, um, let's look for the results of this trade.
12:00I think we have about 30 seconds left in the trade.
12:09And as you can see here, it's consolidating Canadian Swiss franc OTC pairs consolidating here.
12:21And this fractal trading strategy, um, works, works very well during ranging markets.
12:39Okay. So that trade also won. Okay. So I'm back with the, um, Aussie dollar Swiss franc and
12:52this fractal just formed. So I took the trade. As soon as the fractal formed here,
13:00I took the trade and up in the, uh, bullish direction here. And, um, what we're going to do is going to
13:09go ahead and pause the video and, uh, wait for the trade to expire in about three minutes,
13:21uh, two and a half minutes right now. And in about 30 seconds, uh, 30 minutes,
13:28trade is about to expire. I'm going to come back, check the results.
13:31Okay. So we're back with the Aussie dollar Swiss franc. It's about to expire
13:39in about 20 seconds here to trade. And, um,
13:45as you see here, we have a nice ranging market. And so
13:49see that that's what we're looking for here, ranging, not no trend whatsoever.
14:01And, um, all right. So we won that trade. Okay. All right. So I'm going to pause the video
14:08and look for another setup, uh, take one more trade and then we'll call it a session.
14:14Okay. Okay. So I'm back again with, uh, another trade on the Canadian Swiss franc here.
14:24Uh, this green fractal just formed, um, you know, consolidating market here on this particular
14:33currency pair, as you can see here. And, um, we're gonna once again, pause the video
14:41video and wait for the trade to expire in roughly two and a half minutes
14:48and, uh, see the results of the trade. Be right back.
14:55Okay. So I'm back with this last trade here. This looks really close. Um,
15:03all right. So we just have a bearish push here at the end and
15:11okay. So we won that trade as well. All right. So that's basically the concept of the strategy here.
15:23We're looking for a consolidating or ranging market. Um, like I said, I've, I've been trading
15:31outside the normal trading hours when, where the market, uh, price action is really thin.
15:37Um, and this is a perfect example. So you, what you can do is just sit on a particular currency pair
15:45and which most of the trades I took were on the Canadian dollar Swiss franc.
15:50And, um, we had a pretty good set of winners. All right. And that's basically it for today. So
15:59if you liked the video, you know, give it a thumbs up, comment about the strategy, share the strategy.
16:08And thanks for watching.