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When it comes to trading, there is no shortage of indicators. Even you and I can develop an indicator of our own with a little knowledge about markets and coding. However, the fact that it is useful or not is something to be seen. In this article, I’m going to present a hidden gem of an indicator, the Fractal Chaos Bands.
Let’s be straight. You might be skeptical of indicators because they are lagging tools. Or you might just be a pessimist, believing that they make things too easy to be useful. You might be right, at least about most indicators. But, when it comes to the Fractal Chaos Bands indicator, this might not be the case.
• The Fractal Chaos Bands (FCB) indicator is a trend-following tool that helps traders filter out market noise and identify price trends.
• It consists of two bands—an upper fractal line (highs) and a lower fractal line (lows)—that adapt to price movements.
• The slope of the bands indicates whether the market is trending (angled bands) or ranging (flat bands).
• A breakout outside the bands suggests a strong price move, offering trade entry opportunities.
• Traders can use FCB on Pocket Option and TradingView, with higher periods reducing sensitivity to price fluctuations.
• The recommended binary options strategy involves entering trades after price breaks outside the bands, with expiry set to 3-5 candles after the breakout.
• Avoid trading in range-bound markets where bands are flat, and always backtest strategies before using them in live trades.
• Risk management is key—never risk more than 2% of your account per trade and always test strategies on demo accounts before committing real funds.
What Is the Fractal Chaos Bands Indicator?
The Fractal Chaos Bands is a technical analysis indicator. In fact, in the classification of indicators, it is known as a trend indicator. The FCB is based on fractal geometry. Now, what is a fractal? A fractal is a geometric pattern that repeats itself on different timeframes and scales. So, the Fractal Chaos Bands indicator is essentially a pattern identifier.
The Fractal Chaos Bands indicator consists of two lines:
- The upper fractal line: A line formed by plotting the highest price points within a specific interval.
- The lower fractal line: It is formed by plotting the lowest price points within the same interval.
The FCB indicator looks back in time based on the number of time periods you select to plot the indicator. Essentially, the FCB Indicator shows an overall panorama of the price movement by filtering out small price fluctuations.
The slope of the bands indicates whether the market is trending or not. When the market is trending, the bands will have a noticeable slope. Meanwhile, in a consolidating or choppy market, the bands will flatten out.
Now, you get why it is called Fractal “Chaos” Bands, don’t you? It’s because it filters out chaotic and choppy price moves. In fact, markets are chaotic, and chaos is in their nature. However, the FCB helps you look at what matters the most.
How to Use Fractal Chaos Bands Indicator?
While there is no complex mathematical concept behind the FCB, it can be very useful. Let me show you how to set the parameters and how to use the Fractal Chaos Bands to trade.
Setting Up the Fractal Chaos Bands on Pocket Option
The first step to use the Fractal Chaos Bands correctly is to set the parameters and to do it right. I’ll show you these steps on the Pocket Option trading platform, as it can be one of the best indicators for binary options trading.
First, to apply the Fractal Chaos Bands to your chart on Pocket Option, click on the indicators menu. It’s located on the top left of the screen. Then, select the Fractal Chaos Bands indicator.
The indicator will then show up on the Pocket Option chart. It will look like the image below:
You can choose the period you like by clicking on the indicator settings (the pencil symbol beside the Fractal Chaos Bands). Choosing a higher period will result in wider bands. On the other hand, lower periods will make the fractal bands narrower.
Setting Up the Fractal Chaos Bands on TradingView
For traders interested in instruments other than binary options, I’ll show the FCB on TradingView. On TradingView Supercharts, you should click on the Indicators tab and search for the term “Fractal Chaos Bands.” It will show up in the options, and you can apply it to the chart by clicking on it. Note that the FCB was developed by the TradingView community and is not a preset indicator on TradingView.
Here is an image showing the Fractal Chaos Bands on TradingView:
How to Read the Fractal Chaos Bands?
As we already saw, the Fractal Chaos Bands indicator consists of just two bands. So, it is really easy to read it. However, interpreting the FCB is completely different. The first thing you can understand from looking at the indicator is the market trend. When there is a significant slope, the market is trending, and when the Fractal Chaos Bands are moving horizontally, the market is range-bound.
Another way to identify strong trends using the Fractal Chaos Bands is by looking at when the price breaks outside the bands. When this happens, the market will likely trend impulsively. So, when the price breaks out of the bands, you have an entry opportunity. I will explain these more clearly in the next section.
Fractal Chaos Bands Trading Strategy for Binary Options
It’s no secret that the Fractal Chaos Bands indicator is a simple one. It’s easy to read and interpret it, as there are not really many different elements. Meanwhile, we can definitely make a profitable Fractal Chaos Bands trading strategy. So, here’s my binary options trading strategy, step by step:
- First, set the period of Fractal Chaos Bands to 1-3, based on your preferences.
- Then, I personally wait for the price to break out of the Fractal Chaos Bands.
- I will enter after the breakout candle closes (in the same direction as the breakout) and put the expiry date of the option to 3-5 candles later. For instance, if I trade a 60 sec binary option, I will set the expiration to 3-5 minutes based on the market conditions.
This is a really straightforward strategy that has worked well for me. Feel free to change any parameter based on your preferences and trading style.
Tips for Trading the Fractal Chaos Bands
Now that we’ve checked out my Fractal Chaos Bands trading strategy, it’s time for me to present some pro tips based on my experience.
- Go with the Flow: It’s always a good idea to execute trades in the direction of the prevailing trend. This tip works regardless of which strategy you use. Going with the trend boosts the probability of your trade significantly.
- Don’t Trade the Consolidation: Do NOT trade when the price is range-bound. You can identify this state when the Fractal Chaos Bands have been moving approximately horizontally.
- Gather Data: To make sure your Fractal Chaos Bands trading strategy works, you need to gather data proving it. Using backtesting software tools could be a good idea to test your strategy on historical data.
- Practice Live: When moving on to a new strategy, it is essential to practice yet. You can use binary options demo accounts on platforms like Pocket Option and Quotex for free to optimize your strategy.
- DON’T Go Big: Yeah, I’m not a motivational speaker. So, don’t risk all of your life savings on a strategy, especially a new one. Take small steps and risk in small increments. I personally don’t risk more than 2% of my account on any trade. Slow and steady wins the race, right?
Conclusion
Using strategies based on indicators can make your decision-making process mechanical. In fact, this is the most powerful benefit of using an indicator like the Fractal Chaos Bands. I’ve explained what the FCB is and how it works in detail and presented you with a Fractal Chaos Bands trading strategy I personally use. So, you can build on what you’ve learned here and modify the strategy to create your own for binary options trading.
Meanwhile, note that indicators are usually lagging tools. They use the past data to predict the future. So, nothing is given. If you prefer other trading methods, check out our free guide to flag pattern trading. Also, for newer and more intuition-based methods, Smart Money Concepts are also a great alternative.
