**Fractals**- an indicator introduced by Bill Williams.

Simple and versatile, fractals can be used as a stand-alone indicator or in combination with other Forex indicators.

### The basics of Fractals indicator

Fractals point tops and bottoms where market reverses.In order for a fractal to form, there should be a series of 5 consecutive bars where the middle bar will be the highest preceded and followed by two lower neighboring bars on each side:- a Buy fractal forms at the top of the price wave with the Highest High in the middle and two Lower highs on each side;

- a Sell fractal forms at the bottom of the price wave with the Lowest Low in the middle and two Higher Lows on each side;

Buy and Sell fractals may share price bars (e.g. use the same bars from the set of 5).

### How to trade with Fractals

Setting a trade at the breakout point is an obvious and simplest application of the Fractals indicator.

**Fractals as trend line connecting points**

Fractals indicator makes it easy to identify and connect the most significant tops and bottoms needed to draw a trend line. Drawing trend lines using

**Fractals as trend confirmation**

As trend (up or down) progresses a successive break and advance of new fractals will be seen. Should the break of the previous fractal fail, we get a first sign of price consolidation.

In an uptrend we will witness that there are more up fractals broken than down fractals. In a downtrend there will be more down fractals broken.

**Fractals for trend consolidation**

Failure to successfully advance past previous fractal puts price on a consolidation path. To avoid an immediate coiling price will attempt to break at the opposite fractal. Should this move also fail to bring results, traders should prepare for a ranging market period till a new successful breakout

### Fractals trading: Bill Williams' Chaos Theory

Fractals indicator is one of five indicators of Bill Williams’ trading system. According to his system, Fractals have to be filtered with the help of Alligator Indicator

**Fractals should be traded the following way:**

• Don’t take any Buy positions if a fractal is formed below the Alligator's teeth.

• Don’t take any Sell positions if a fractal is formed above the Alligator's teeth.

Such signaling fractals remain valid till a pending entry order is triggered or a new valid fractal is formed (a position will then be re-set according with the new fractal). Consecutive fractals going in the same direction that are formed after the first order if triggered can be used to add on to an open trade.