5 min read 

There are many indicators on the platform and even the most picky traders will find something that works for them. Most traders prefer using the popular indicators, as those are already tested out by others and there are a lot of materials and strategies that explain how to use them. However, today we will look at a slightly less popular, but definitely worth trying indicator: Fractal Chaos Bands. This indicator, as follows from its name, has the potential to eliminate the chaos in your traderoom if used correctly. It may be used on its own or combined with other indicators. Let’s see what it could do for a trader’s benefit.

Fractal Chaos Bands

It may seem that the market moves in a chaotic way, however, once the insignificant price fluctuations are filtered out, a certain pattern may be traced. That is exactly what this indicator does: it connects the highest/lowest price points on an interval and this way creates upper and lower bands. The upper band is created by connecting the price highs, while the lower band connects the price lows.

The bands of the indicator basically resemble the movement of the chart, but they smooth out the price noise, only taking significant price movements into consideration.

How to use it? 

When the band is flat, it means that the asset price is more volatile. The signal to a starting trend is when the bands start moving further apart, resembling stairs.

A trader may apply the breakout strategy when using this indicator. With this strategy, a Buying signal is received when the chart moves in a narrow channel and breaks through the upper band from below. 

An example of a Buying signal received from Fractal Chaos Bands

A Selling signal is received when the price is moving in a narrow channel and breaks through the lower band. 

The signals of Fractal Chaos Bands may be further confirmed by using a Simple Moving Average. For such a combination, a buying or selling signal from the bands will be confirmed by the chart position regarding the moving average: crossing it from below for an upward trend or from above, when the trend is downward. 

An example of a Selling signal: the chart is moving below the SMA, breaking through the lower band of the Chaos Bands indicator

How to apply it?

As the indicator does not require any complicated calculations, it can be applied to the chart straight from the Other section of the Indicators tab on the platform. The color of the bands may be changed for convenience. 

Fractal Chaos Bands on the IQ Option platform

This indicator may be combined with other trend or momentum indicators so it is truly universal in that sense. Of course, it is important to remember that no indicator can guarantee 100% success, so a risk management strategy is crucial. 

Now that you know how the Fractal Chaos Bands Indicator works, you can try this indicator on your demo account and see if it could become a part of your trading approach.

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