Fractal Indicator, developed by Bill Williams, is a technical indicator identifying local highs and lows. Fractal is specific pattern of 5 bars where middle bar's high or low is local extreme. Fractals are often used with Alligator Indicator to identify potential support/resistance and entry points.
Up Fractal: Middle bar's high > highs of 2 bars before and 2 bars after Down Fractal: Middle bar's low < lows of 2 bars before and 2 bars after Note: Fractal signal requires waiting for 2 bars after to confirm Valid Fractal: Up fractal above Alligator Teeth line Down fractal below Alligator Teeth line
Standard Fractal: 5-bar pattern
Valid Fractal: Used with Alligator, fractals above/below Teeth line
Breakout Fractal: Price breaks previous fractal high or low
Fractal Support/Resistance: Fractal points as support/resistance levels
Up Fractal: Potential resistance level, sell reference point
Down Fractal: Potential support level, buy reference point
Break Above Up Fractal: Price breaks previous up fractal, buy signal
Break Below Down Fractal: Price breaks previous down fractal, sell signal
Valid Fractal + Alligator Eating: Optimal entry signal
Fractal Cluster: Strong support/resistance zone
Fractal Failure: Price fails to break fractal, possible reversal
Fractal Indicator is important component of Bill Williams trading system, must be used with Alligator Indicator. When alligator is eating (lines separated), breaking valid fractal is entry signal. In uptrend, wait for price to break above up fractal to buy. In downtrend, wait for price to break below down fractal to sell. Fractals can also be used as stop loss levels, placing stops beyond nearest opposite-direction fractal. Areas with dense fractals are typically strong support/resistance zones.
Objectively identifies local highs/lows, provides clear entry signals, can be used as support/resistance, perfectly complements Alligator, part of complete trading system
Requires waiting for confirmation causing lag, generates many signals in ranging markets, must be used with Alligator, limited reliability when used alone
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