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Williams Fractals Indicator

 

Bill Williams Fractals Purpose


Fractals indicator of Bill Williams is one of the figure highlighting the chart’s local heights and lows where the price movement had stopped and reversed. These reversal points are called adequately Highs and Lows. Being one of the most unintelligible terms of the modern mathematics, psychologist and trader Bill Williams dedicates much attention to fractals and described it in his book “Trading Chaos” for better recognizing and estimating the market price movements. The price patterns can be used to verify price movement. They consist of at least five bars, and typically planned as a set of high and low arrows placed over the reversal points in the price action.


Fractals can be bullish or bearish, so the basic strategies for identifying them are:

  • Bearish – when a price outline has the highest high in the center, affiliated by two lower highs.
  • Bullish – when a price outline has a lowest low in the center, affiliated by two higher lows.

Fractals are covering indicators so they do not have predicative value for the price since they follow it. Traders generally use them with other indicators to confirm that reversals have indeed occurred.



Bill Williams Fractals Usage


Fractals are usually used in recognize whether or not a price reversal has occurred. One of the most ordinary usages of Fractals indicator is in combination with the Alligator trading system developed by Bill Williams. Buy fractal is an arrow pointing to the top, and Sell fractal is an arrow pointing to the bottom



Bill Williams Fractals Calculation Method:


Define:
  • N = the number of the time period bar in question.
  • High (n) = the high price traded during time period n.
  • Low (n) = the low price traded during time period n.
Calculation:
  • An UP Fractal exists at n if the following conditions are met:
    High(n-2) < High(n)
    High(n-1) < High(n)
    High(n + 1) < High(n)
    High(n + 2) < High(n)

  • A DOWN Fractal exists at n if the following conditions are met:
    Low(n-2) > Low(n) 
    Low(n-1) > Low(n)
    Low(n + 1) > Low(n) 
    Low(n + 2) > Low(n)

 

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