Bill Williams indicators
Fractals (Bill Williams)
Little arrows that mark local tops and bottoms: a high with two lower highs on each side, or a low with two higher lows.
L’idée en termes simples
Prices move in swings. Fractals mark the turning points of those swings, giving you natural levels where the market changed its mind, and a breakout above the last up-fractal shows new strength.
Mode de calcul
An up fractal is a candle whose high is higher than the highs of the two candles before and the two after. A down fractal is the mirror image for lows.
Up fractal at candle i: high(i) > high(i±1) and high(i) > high(i±2)
Down fractal: low(i) < low(i±1) and low(i) < low(i±2)Comment l’utiliser
- Buy stop just above the latest up fractal, sell stop just below the latest down fractal (Williams' breakout entries).
- Use recent fractals as stop-loss levels.
Tirer des conclusions
- Because two later candles are needed, a fractal appears two candles after the actual high or low.
Exemple
On a 1-hour chart an up fractal forms at 1.0870. An hour later the price breaks above 1.0871: a breakout entry.
Les prix des exemples sont donnés à titre d’illustration.
Points de vigilance
- Many small fractals form in quiet markets; higher timeframes give more meaningful ones.
Un peu d’histoire
Bill Williams, "Trading Chaos" (1995), borrowing the word from chaos theory.
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