what the fractal indicator tells you
the fractal indicator will generate signals frequently the existence of a fractal isn t necessarily important since the pattern is so common the fractal is indicating the possibility of a trend change this is because fractals are essentially showing a u shape in price a bearish fractal has the price moving upward and then downward forming an upsidedown u a bullish fractal occurs when the price is moving down but then starts to move up forming a u because fractals occur so frequently and many of the signals aren t reliable entry points fractals are typically filtered using some other form of technical analysis bill williams also invented the alligator indicator which isolates trends by combining fractals with trend analysis a trader may decide to only trade bullish fractals signals while the price trend is up if the trend is down they may take only short trades on bearish fractal signals for example fractals could also be used with other indicators such as pivot points or fibonacci retracement levels a fractal is only acted on if it aligns with one of these other indicators and potentially the longer term price direction for example assume a stock is trending higher the price is pulling back and reaches a 50 fibonacci retracement level since the trend is up and the price is near a fibonacci retracement level the trader will take a trade if a bullish fractal forms the difference between the fractal indicator and chart patternsthe fractal indicator is unique in that it identifies a price pattern and marks it on the chart fractals are specific five bar patterns chart patterns can also be drawn on the chart although they are not limited to five price bars popular chart patterns include wedges flags and head and shoulders to list a few while some software will mark chart patterns on a chart most chartists find and isolate chart patterns by hand limitations of using the fractal indicatorthe main problem with fractals is that there are so many of them they occur frequently and trying to trade all of them will rapidly deplete a trading account due to losing trades these are called false signals or whipsaws therefore filter the signals with some other indicator or form of analysis the arrows for the indicator are typically drawn over the high or low point which is the middle of the fractal not where the fractal completes therefore the arrows can be visually deceiving since the pattern is actually completing two bars to the right of the arrow the first available entry point after seeing an arrow is the opening price of the third bar to the right of the arrow 