# How To Trade The Fractal Indicator

Apply the indicator to the chart, and the software will highlight all the patterns.

Current price movement 1 point higher the level of the fractal up is the breakthrough of the sellers, while if it is 1 point below the fractal down, it is a breakthrough of the buyers. If going short , during a downtrend, a stop loss could be placed above the recent high.

Any trader should be able to add the indicator without any problems. Introduction to Fractals When people hear the word "fractal," they often think about complex mathematics.

## Introduction to Fractals

As you can see above, those are all 5 of Bill Williams powerful indicators that come standard on your trading platform. Fractal Trading Strategy Steps: As I have said, they do come standard on every trading platform that I am aware of so this should be very simple for you to do.

Once you do this your chart will look like this: Step 2 Trading fractals bill Williams: The fractals indicate a bottom or a top.

The basic fractal indicator is composed of a very minimum of 5 bars. So when you see a fractal here is what may have happened for it to appear: There were a series of at least five successive bars, with the highest high in the middle and then the two lower highs are on both sides. There was a reversing series of at least five successive bars, when the lowest low is in the middle and the two higher lows were on both sides which forms a sell fractal Fractals can appear with only one candle to the right of it but be aware that this is an unconfirmed fractal because the price action may pierce through the level.

So in order for a fractal to appear and stay on the chart forever, the trader must wait for 2 candles to the right of the fractal. The fractals have whats called a high and a low value. This is indicated by the up or down arrows. Above are the unique alligator indicator lines on the chart. Now you need to be aware of where the fractals are being placed on the candles for this strategy concerning this special indicator.

Below is the fractal that we want to take special note of: I drew a yellow circle on this specific up fractal. What is happening here is that the fractal forms a new high to the previous fractal and therefore made an up fractal appear on the candle. You can also trade with the breakout triangle strategy. Any one of those does not sound pleasant if you are looking for a big upward bullish move to form on the chart.

As you can see, the price action stayed quiet and did not move up or down drastically these five candles. That is exacly what you should see when trading this strategy. As you can see if this would have happened in our BUY trade example, then we would have told ourselves that this buy trade is invalidated and we should look elsewhere.

The reason is that this could trigger a long Bearish trend which would not be good if you are attempting to go long here. Any of the two lines of the Alligator indicator have crossed after the identified fractal candle in Step 1. Step 3 Price Action Need to Break Above Fractal Candle That was Distinguished in Step 1 Once you see that five consecutive candles did not make a drastic move to the downside and stay in between the high of the fractal candle and the alligator teeth, then we go ahead and make an entry order.

You can make an entry this way, or if you are sitting in front of your charts live with this occurs, then you can make a market order also. Either one is ok to do because the same criteria is needed.

Here is what it will look like: As you can see, I marked where our original fractal was discovered. What happened after was that there were five or more candles that appeared that did not drift down to the alligator teeth, the alligator lines did not cross, and the price action finally broke above the fractal candle thus triggering a trade.

Exit the trade when two of the alligator lines cross over each other. This most likely means the alligator is going back to sleep and the price action will either head the other way or consolidate. Fractals are composed of five or more bars.

The rules for identifying fractals are as follows: A bearish turning point occurs when there is a pattern with the highest high in the middle and two lower highs on each side. The fractals shown below are two examples of perfect patterns. The obvious drawback here is that fractals are lagging indicators. However, most significant reversals will continue for more bars, benefiting the trader. Once the pattern occurs, the price is expected to rise following a bullish fractal, or fall following a bearish fractal.

Fundamentals of Fractal Markets Theory. Applying Fractals to Trading Most charting platforms now provide fractals as a trading indicator. This means traders don't need to hunt for the pattern. Apply the indicator to the chart, and the software will highlight all the patterns. Upon doing this, traders will notice an immediate problem: Fractals are best used in conjunction with other indicators or forms of analysis. A common confirmation indicator used with fractals is the alligator.

Since the trend is up, bullish signals could be used to generate buy signals. Exploring the Williams Alligator Indicator. While slightly confusing, a bearish fractal is typically drawn on a chart with an up arrow above it. Bullish fractals are drawn with a down arrow below them. Sometimes switching to a longer time frame will reduce the number fractal signals, allowing for a cleaner look to the chart, making it easier to spot trading opportunities. This system provides entries, but it is up to the trader to control risk.

In the case above, the pattern isn't recognized until the price has started to rise off a recent low. Therefore, a stop loss could be placed below a recent low once a trade is a taken. If going short , during a downtrend, a stop loss could be placed above the recent high. This is just one example of where to place a stop loss. One of the issues with fractals is which one of the occurrences to trade. Traders also tend to focus on trades at certain Fibonacci ratios. This may vary by trader, but say a trader prefers to take long trades, during a larger uptrend, when the price pulls back to the Fractals could be added to the strategy:

This reversal pattern, known as fractals, can make sense of the seeming randomness of market movements and improve your trading.

Apr 03,  · This article examines The Fractal Indicator and why the indicator is such a powerful concept in trading. The tool is extremely useful for trade management and identifying key levels in the market.4/5(2). Trading with fractals is extensively used by the large market players and it is the best indicator of the fractals’ reliability. The combinations of fractals have such characteristics as self-similarity, scaling and memory of the «entry conditions», and, therefore, they can be used successfully for making price forecasts.