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Fractal analysis applied in trading on the financial market, can make the traders’ work much easier. In spite of its difficulty, fractal analysis can help trader to predict the growth or downfall of the price rates and, consequently, pricing and market behavior will become foreseeable. However, if you want to get into the essence of the fractal analysis you have to cast doubt on the Efficient Market Hypothesis. According to the theory, the present price is not connected to its past values, so neither long-term nor short-term chart will predict the price movement. Thus, it looks unpredictable which means high-risky.
This is the main difference between the Efficient Market Hypothesis and the fractal analysis the founders of which consider it possible to plot charts which enable traders to see this slight connection. Let’s look at the meaning of the word, Latin flactus is treated as broken. Consequently, the fractal analysis bases upon not straight line, but the wavy line, which is reasonable because the market never acts according to the same scenario – increase and decrease of the currency rates are inevitable. But it is silly just apply the wavy chart of the past period to the present condition of the market, it will never work or bring any result. What shall we pay attention to? First of all, note factors which formed the price in some certain period. In case political, economic and social factors coincided, we can be sure that the price will move in the same way it did some time ago.
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