Fractals
Introduction
Section titled “Introduction”All markets experience periods where prices remain relatively stable, with only a small percentage accounting for trend changes. The most profitable periods occur when market prices follow a specific trend.
Fractal Indicator
Section titled “Fractal Indicator”The Fractal is one of the five indicators in Bill Williams’ trading system. It helps identify market bottoms and tops.
Fractal Technical Indicator
Section titled “Fractal Technical Indicator”The Fractal Technical Indicator consists of at least five consecutive bars. It has the highest HIGH in the middle, with two lower HIGHs on each side. The reversing set has the lowest LOW in the middle, with two higher LOWs on each side. Fractals are marked with up and down arrows, indicating their High and Low values.
Filtering with Alligator
Section titled “Filtering with Alligator”The Fractal should be filtered using the Alligator indicator. If the Fractal is below the Alligator’s Teeth, do not close a buy transaction. If the Fractal is above the Alligator’s Teeth, do not close a sell transaction.
Fractal Signal
Section titled “Fractal Signal”Once a Fractal signal is generated and remains beyond the Alligator’s Mouth, it remains a signal until it is attacked or a more recent Fractal signal appears.
Fractals in Trading Signals
Section titled “Fractals in Trading Signals”A fractal is only confirmed after two complete bars have formed on its right side, so on the most recent bars a fractal can still appear or disappear. Use a Shift of 3 or higher if you only want to act on confirmed fractals. On bars without a fractal the indicator has no value.