Let's learn about this very interesting indicator known as the Fractal. This indicator is used by traders to identify reversal points, and it's only used on candlestick charts. It was invented by Bill Williams, who also came up with the Awesome Oscillator. It's used to see the direction in which a price will develop. It's also used as a resistance and support, to understand the trend, as well as identify the correct entries.
Take a look at the EUR/GBP forex chart above. Do you see those green and red arrows pointing up and down (respectively) ? Those are the Fractals. They are simply known as the Up Fractal and the Down Fractal.
Up Fractal --> the trend is going bearish (downward)
Down Fractal --> the trend is going bullish (upward)
when to use fractals
The Fractals are best used in conjunction with the Alligator indicator. You can read more about it here.
When used together, these two indicators have the capability of delivering highly accurate signals. You can choose any asset, as well as the time frame you desire.
Let's take a look at the image below to learn how to interpret the signals from using these two indicators together. We have the CHF/SGD forex pair.
The three lines going up and down are the Alligator Indicator. The Fractals are clearly visible, and so is the blue Alligator line (NB. you can change the colours of the lines to suit your preference).
BUY signal --> when the red arrow is below the blue line
SELL signal --> when the green arrow is above the blue line
Looking at the image above, can you identify a few signals? That's right. There are two BUY ones and a number of SELL ones.
You can make this more accurate by increasing the period during the setup. However, this will give you fewer signals. Try putting 10, or 15, and see how that works out for you.
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