What’s Fractal?
The fractal indicator uses a typical financial market price pattern. Beyond trade, a fractal is a repeating geometric pattern over all time frames. The fractal indicator came from this idea. The hand identifies price chart turning moments. It then draws arrows to show designs.
The bullish fractal design suggests a price increase. A bearish fractal indicates a price drop. Bearish fractals have an up arrow, whereas bullish fractals have a down arrow.
Calculating Fractal Indicator
Visual acuity is more critical than arithmetic in fractal calculation.
- Find a chart of highs and lows (N).
- Two lower highs or two higher lows (N-2 and N-1) to the left of the high may indicate a pattern. This pattern requires two additional suitable bars to validate.
- A bearish fractal (N+1 and N+2) is complete, with two lower highs after the high. Two higher lows after the quiet full, a bullish fractal
Fractal Indicator Messages
Fractal indicators indicate frequent Considering how prevalent fractals are, their presence isn’t crucial.
The fractal suggests a trend shift. Because fractals indicate a “U-shape” in pricing, bearish fractals produce an upside-down U with price movements up and down. When the price falls and rises, a bullish fractal forms a U.
Some technical analysis filters fractals since they occur often, and many signals aren’t good entry points. Additionally, Bill Williams created the alligator indicator to identify patterns. Fractals and trend analysis may lead a trader to trade only positive fractal signals when the price trend increases. If the movement is down, they may only sell short on bearish fractal indications.
Consider combining fractals with additional indicators like pivot points or Fibonacci retracement levels. We only act on fractals that match one of these indications and the longer-term price direction. Suppose a stock is rising. Price pulls down to 50% Fibonacci retracement. A bullish fractal will prompt the trader to act as the trend is up and the price is near a Fibonacci retracement level.
Fractal Indicator vs. Chart Patterns
Unlike other indicators, the fractal indicator marks price patterns on the chart. Fractals are five-bar designs. The chart allows for the drawing of ways beyond the five price bars. Wedge, flag, and head-and-shoulders chart patterns are popular. Some software marks chart patterns, although most chartists locate and isolate them manually.
Limited Fractal Indicator Use
The abundance of fractals is the fundamental issue. As they occur regularly, trading them all will quickly drain a trading account owing to losses. These are known as false signals, or whipsaws. Thus, filter signals using another indication or analysis.
The indication arrows usually point to the middle of the fractal, not its end. Therefore, arrows can appear deceptive. The initial entry point after spotting an arrow is the opening price of the third bar to the right of the indicator, since the pattern completes two bars to the right.
Conclusion
- The bullish fractal is characterized by a low point with two higher low bars or candles on either side.
- A bearish fractal has a high point with two lower bars or candles on either side.
- Up arrows indicate bearish fractals, while down arrows indicate bullish ones.
- The five-bar design has arrows above or below the main bar. The arrow only happens if the following two bars form the pattern; therefore, traders cannot initiate trades at it.
- To trade fractal signals, enter at the open price of the third bar after the arrow.
