Fractals
Introduction
Section titled “Introduction”All markets experience periods where prices remain relatively stable, with only a small percentage of time dedicated to trend changes. The most profitable opportunities often arise when market prices follow a specific trend.
Fractals
Section titled “Fractals”Fractals are one of the five indicators in Bill Williams’ trading system. They help identify market tops and bottoms. An upwards fractal consists of a series of at least five bars, with the highest high in the middle and two lower highs on either side. A reversing set, or sell fractal, consists of a series of at least five bars, with the lowest low in the middle and two higher lows on either side. Fractals are represented by up and down arrows on a chart.
Signal Filtration with Alligator
Section titled “Signal Filtration with Alligator”Fractal signals should be filtered using the Alligator indicator. If a buy transaction is open, it should not be closed if the fractal is below the Alligator’s Teeth. Similarly, if a sell transaction is open, it should not be closed if the fractal is above the Alligator’s Teeth.
Signal Validation
Section titled “Signal Validation”Once a fractal signal is generated and confirmed by its position beyond the Alligator’s Mouth, it remains a valid signal until it is either challenged or a more recent fractal signal appears.