Fractal Indicator Guide
Williams Fractal indicator is one of the five technical analysis indicators on MT4 developed by Bill Williams in his book ” Trading Chaos “. These analytic tools are available by default on various trading platforms such as MetaTrader and Tradingview terminals. The author was a trader and a trainer with more than 50 years of experience trading in various financial markets such as commodities, stocks, and foreign exchanges. Williams Fractal MT5 indicator is very useful in FX trading strategies as it enables Forex traders to determine the bottom and the top of the price chart. We will apply this Williams Fractal indicator in Tradingview charts to get the best fractals breakout signals. Also, we will focus on the fractal swing trading strategy to get the best trend pullback and reversal alerts.
Bill Williams Fractals FAQ
What are Bill Williams fractals ?
Fractals are trading phenomena that can include any number of successive candlesticks with a minimum of 5 candles ( bars ). To explain, the fractal indicator pinpoints troughs and peaks on the trading chart. In fact, there are two types of chart fractals.
Fractal down
Fractal down is a downer fractal that arises below the candlestick. The low price of this candlestick is lower than the lowest of the two past and future candles that build the fractal down phenomenon. Therefore, the downer fractal signal helps online traders determine a local bottom of a financial asset. And this may assist them to catch probable reversions.
Fractal up
Fractal up is an upper fractal that arises above the candlestick. The high price of this candlestick is higher than the highest of the two forthcoming and preceding candles that create the fractal up phenomenon. Consequently, the upper fractal signal aids currency traders to determine a local top of a forex instrument. And this can assist them to detect likely pullbacks.
How does the Williams fractal indicator work ?
Williams Fractal indicator performs a few steps to draw up and down arrows in the MT5 trading platform. The indicator first considers a series of candles. Note that the minimum number of candles should be at least five. Then the indicator compares the middle candle to the two preceding and two consecutive candlesticks.
From one part, the indicator draws a green buy fractal when the lowest price of this middle candle is downer than other considered candles on both sides. Hence, fractal down signals are drawn by the indicator at the bottom.
From another part, the indicator draws a red sell fractal when the highest price of this middle candle is upper than other considered candles on both sides. Hence, fractal up signals are drawn by the indicator at the top.
Finally, the traders can use up and down fractal signals to trade currency pairs and build a forex trading strategy.
What is the function of fractal in forex ?
- Fractals as connecting points of trend lines
Fractals can offer a benefit to forex traders as the other participants in the market utilize the same evident prices to plot trend lines. Therefore, this indicator facilitates determining and connecting the most significant highs and lows to plot trend lines.
- Fractals as reversal points
A new fractal emerges as the trend progresses. If the prior fractal breakout fails and the price pulls back, we obtain the first sign of price reversal.
- Fractals as breakout levels
As fractals highlight points where the trend failed and reversed. A new force can ensue when the price crosses the prior fractal. Thus, trading fractals breakout levels is a simple and evident application of the fractal indicator.
How to trade with Williams fractals ?
Williams fractals indicator is an MT4 forex strategy that can be utilized either standalone or in a mixture with other technical tools.
The fractal theory is very reliable in detecting likely breakouts by comparing the position of the most recent fractal signal compared to the prior fractal signal. Because Bill Williams insisted that traders use fractal signals in that manner. He believes that when the price evolution goes beyond or beneath a previous fractal signal, then this indicates a highly probable breakout alert. Hence, let us get deeper into the fractal breakout trading strategy.
Buy Fractals Breakout strategy
A buy fractals breakout strategy requires that the price goes beyond the latest up fractal indication in an upward-trending market. Because this last up fractal becomes a broken resistance. Also, it is better that the fractal tool has already printed a new fractal down at the same time. Hence, you may initiate a buy trade once a bullish candle closes above this prior fractal up. Traders may set a stop loss below the current fractal down and a take profit at the next fractal up using this buy fractals breakout strategy. The following CADJPY daily chart illustrates the fractals buy strategy.
Sell Fractals Breakout strategy
A sell fractals breakout strategy requires that the price falls below the latest down fractal indication in a downward trending market. As this last down fractal becomes broken support. Furthermore, it is better that the fractal tool has already printed a new fractal up at the same time. Thus, you may initiate a sell trade once a bearish candle closes below this earlier fractal down. Traders may set a stop loss above the current fractal up and a take profit at the next fractal down using this sell fractals breakout strategy. The downer Euro, and US dollar one-day chart illustrates the fractal sell strategy.
Bill Williams strongly believes that markets as having 5 dimensions that can help Forex traders to understand the market structure. Also, he states that his five technical indicators have better be used all together to build a profitable trading system.
Is fractal indicator reliable ?
Williams Fractal indicator reliability tends to increase with long time frames in forex trading compared with short time frames. Yet, it has pros and cons like any other technical analysis tool.
Pros
- Simple to use and understand, and once you grasp it well you can trade with it profitably.
- Fits almost all timeframes, especially longer ones.
- Helps to identify likely breakout opportunities.
- In addition to highs and lows, the Williams fractal also exhibits possible S&R levels of buy and sell transactions.
- Can be used as an additional indicator to determine trend changes.
- Available by default in any trading platform.
Cons
- It is only useful for the trending market. Hence, can produce misleading signals in ranging markets.
- Fractal indicator lags by a couple of candlesticks because it needs at least 2 candlesticks for a fractal to complete. This means when this indicator provides a signal, it is probable that the price is at another level compared to the signal.
Download Williams Fractal indicator for MT4
Williams Fractal Indicator is an MT4 technical indicator by Bill Williams that is used by Forex traders to determine trend reverses. It consists of 2 groups of arrows. Upward arrow and downward arrow. These arrows appear immediately when you add the indicator to your MetaTrader 4 chart. This MT4 indicator presents a default setting which is a grey arrow as you can see in the graph below. You can change the color of the arrow, for example, green for the down fractal arrow and red for the up fractal arrow.
Download Williams Fractal indicator for MT5
Williams Fractal indicator is an MT5 technical tool that considers five successive bars which contain 2 bars before and after a more elevated or inferior bar. It displays fractals once they are formed in your MetaTrader 5 chart in any timeframe you choose to trade. Keep in mind that this MT5 indicator does not possess any notification capabilities. Therefore you have to keep an eye on your chart to get fractals buy and sell signals.
Download Williams Fractal indicator for Tradingview
Williams Fractal Tradingview indicator displays arrows in the price chart which tell you when the fractal is formed. Each arrow appears above or below the third bar. The green above arrows relate to a buy fractal. While the red below arrows relates to a sell fractal. This Williams Fractal indicator is available by default in the Tradingview platform. Also, there is a free download custom version with colored arrows.
Conclusion
Wiliams Fractal is a default technical indicator for Tradingview and MetaTrader platforms. it is an unusual but useful tool. It can help you to build a profitable trading system. Moreover, Bill Williams has five other technical indicators which are all available by default in the MetaTrader platform. Fractal is the least famous one as it provides a different system.
Key takeaways
- Williams Fractal indicator allows Forex traders to follow the price move.
- Fractals possess at least five bars, these bars superpose as follows, a highest or lowest bar with two bars on the sides.
- This indicator exhibits two kinds of arrows in the main chart (up and down arrows).
- You don’t need to download it, as it is available by default in MetaTrader and Tradingview platforms.
