Trading fractals: A Trader's Guide to Using Fractals

fractal reversal
fractal reversal patterns

You need the fifth bar to close to discover the highest high or lowest low. We will go more into detail about this indicator and show you how to use the alligator indicator. You can find the fractal indicator on mt4 or other popular trading platforms. There is no need to have to run a fractal indicator download because it will already be there for you.

entry signal

This will give you the best opportunity to salvage a trade if the price action would turn on you and turn into a bearish trend. It may “bounce” off these areas and head back in a bullish direction. As you can see, the price action stayed quiet and did not move up or down drastically these five candles. That is exactly what you should see when trading this strategy. More often than not when a fractal appears like the one above, the price action is still “flat”. This means there has not been a real breakout in the recent timeframe.

For example, a trader might use a daily or weekly chart time frame to get a bigger picture view of the market he wishes to trade. Thereafter the trader may look to a smaller time frame such as a 1-hour or 15-minute chart time frame to help fine tune entry and exit points. Many traders will use fractal signals in conjunction with oscillators such as the stochastic or relative strength index for a confirmation of a bullish buy signal. In this regard a fractal buy signal would be considered to have greater validity when accompanied by an oversold signal.

Bill Williams Fractals: How to use Fractals in Trading?

Before we start trading using fractals profitably, I want to give you some background information on Bill Williams himself. This will help you understand the significance of these special indicators. Fractal markets hypothesis analyzes the daily randomness of the market through the use of technical analysis and candlestick charting. Traders will often use fractal signals in conjunction with oscillators such as the stochastic or RSI for a confirmation of a bearish sell signal. In this regard a fractal sell signal would be considered to have greater validity when accompanied by an overbought signal. Some common mistakes traders make when using the Fractal Trading Strategy include using the indicators in isolation, failing to identify the trend correctly, and overtrading.

A fractal can’t be drawn until we are two days into the reversal. 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. There are two common trading concepts in technical analysis relating to fractals; fractal reversal patterns and fractal multiple time frame analysis. Well,These are simply arrows that are on top or below the candles on the chart. These fractals are formed when five repeated bars align in a distinct manner.

In case we couldn’t get through, we will try again at the same time the next day. Place your stop loss below prior support/ resistance areas. Check out my other article here that talks about these important areas.

Labor Market and Real Estate Market data was published yesterday. Markets are slowing down, so the economy is in recession. Today the traders should pay attention to the Retail sales in Canada. Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

Live prices on most popular markets

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. To the left and to the right of the middle candlesticks we have two other candlesticks. Bear in mind that the fractal indicator will display an arrow only above the middle candlestick if it’s the highest or lowest point of the 5 candlestick price formation. Fractals may be useful tools when used in conjunction with other indicators and techniques.

You’ll learn how to use this strategy step-by-step to hit consistent winning trades. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

One of the issues with fractals is which one of the occurrences to trade. And one of the problems with Fibonacci retracement levels is which retracement level to use. By combining the two, it will narrow down the possibilities, since a Fibonacci level will only be traded if a fractal reversal occurs off that level.

For example, if going long on a bullish fractal, a trader could exit the position once a bearish fractal occurs. Other exit methods could also be used, such as profit targets or a trailing stop loss. 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. Therefore, if using fractals in an overall uptrend, look for the down fractal arrows . If looking for bearish fractals to trade in a larger downtrend, look for up fractal arrows.


A bearish fractal reversal pattern suggests the end of near-term uptrend and the beginning of a new downtrend. Traders might use this pattern as a short entry signal or a signal to exit an existing long position. Fractals are best used in conjunction with other indicators or forms of analysis.

Step #2: Trading Fractals Bill Williams: Identify where the Fractal Has Formed (above or below alligator teeth)

Cory Mitchell, CMT is the founder of He has been a professional day and swing trader since 2005. Cory is an expert on stock, forex and futures price action trading strategies. Another unrelated interpretation of fractal analysis in trading, is that of multiple time frame analysis.

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If you’re a day trader or a scalper you should use a fractal formation built with 3 candlesticks. We developed a strategy called theBig Three Trading Strategythat uses three specific moving averages as well if you wanted to check that out later. But the important part to note about all of this is that his analysis and perspective of the market were different. Thesepowerful indicators are not outdated, as some claim. Fibonacci retracement levels are horizontal lines that indicate where support and resistance are likely to occur. The following graph illustrates what a bullish fractal pattern looks like.

The key indicators used in the FractalTrading Strategy include Bill Williams Fractals, Alligator Indicator, Awesome Oscillator, and Acceleration/Deceleration Indicator. Step #4Exit the trade when two of the alligator lines cross over each other. Exit the trade when two of the alligator lines cross over each other. 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 are needed.

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The fractals have what’s called a high and a low value. N represents the high or the low of the current candlestick. As you can see above, those are all 5 of Bill Williams’ powerful indicators that come standard on your trading platform. This is because we will reference them later on in the strategy. Most charting platforms now include fractals in the indicator list.

A common confirmation indicator used with fractals is the Alligator. On the chart below is a long-term uptrend with the price staying predominantly above the alligator’s teeth . Since the trend is up, bullish signals could be used to generate buy signals.

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