Fractals & Degrees
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Fractals refer to the phenomenon observed in the Elliott Wave and Chaos Theories that natural life evolves in a series of self-similar patterns at each degree of evolution. A market evolves in a series of self-similar patterns at each degree of trend or each degree of time.
Fractals are the smallest of swings in a chart. One swing-high fractal is formed when there are at least 2 candles to the left and two to the right having their highs lower than the high of the swing-high candle
It takes one swing low and one swing high to make one swing leg. If the swing low is before the swing high, it’s an up leg (bullish leg) as shown in the picture below. Sometimes there are two swings low before a swing high, in this case, we ignore the middle swing low as shown in the picture below. The whole of the blue shaded area is one fractal.
A larger degree fractal will have a smaller degree fractal inside it. Below there are three degrees of fractals: swings marked with purple, green and red lines.
In the image below, the circled waves are correction of the Impulse before it. Each impulse has its correction and then resumes the trend with another impulse. Each colour is one degree structure, so the yellow is highest degree structure and green is the smallest degree structure. The ones that have a set of Impulse-correction-Impulse are circled with their respective colours.
Degrees can be recognized in a chart with the help of the time factor of the corrective waves with respect to their impulsive waves. It can also be identified with the help of a trendline.
How to draw a trendline. The purple line is the trendline drawn joining two impulsive waves.
Connect the last two bottoms of the impulses in an uptrend and two tops of the last two impulses in a downtrend.
Trendline is to be drawn joining only the last two impulsive waves.
Trendline is always on the right side of the chart.
Trending mode
Up trend: low, high, higher low and higher high;
Downtrend: high, low, lower high and lower low
When a trendline is broken, the whole set of impulsive and corrective waves become one impulsive wave of one degree as shown in Fig. 8 the purple line is marking the one single impulsive wave that formed after the break of the trendline. The break of the purple trendline in Fig. 9 below shows the formation of a single-degree wave after break of the trendline.
