How to Use the Fractal Indicator Accurately

 How to Use the Fractal Indicator Accurately

 How to Use the Fractal Indicator Accurately

The Fractal indicator is an indicator that is often applied together with other indicators such as the Moving Average (MA), the Stochastic Oscillator (OS), and the Relative Strength Index (RSI). How to use the fractal indicator accurately? Read more in the following article!

Also read: What is Leading and Lagging Indicators in the Crypto World?

What is a Fractal Indicator?

The fractal indicator is one of the trading indicators used to identify potential turning points for asset price movements in the market. A fractal is a recurring geometric pattern that occurs across various trading time frames. This indicator is often referred to as the Williams Fractal indicator because it was developed by Bill Williams.

Cory Mitchell from Investopedia said that the fractal indicator is a simple pattern that is often found in financial markets. The fractal indicator is accurately depicted by five candlesticks and arrows indicating a pattern that represents the possible direction of price movement in the market.

The Corporate Finance Institute team revealed that the fractal pattern has a shape like the letter "V" or "U" in bullish conditions and inverted when market conditions are bearish. The fractal indicator is relatively easy to spot on candlestick charts and can provide traders with fairly clear entry and stop-loss signals.

When Does the Fractal Indicator Appear?

Cointelegraph's Yashu Gola revealed that the fractal indicator seen on the ETH price chart in 2017 had pushed the price of ETH up more than 7,000%. He added that the same bullish fractal indicator resurfaced this year and sent ETH up 360% to $3,350.

Fractal Indicator Function

In his book entitled “ Trading Chaos ”, Williams reveals that accurate fractal indicators can be used to detect price movements that occur for any trading time frame (hourly, daily, weekly, etc.), as well as identify market reversals.

Traders usually use daily or weekly charts to get the big picture of the asset market. Meanwhile, charts in shorter time frames such as 1 hour or 15 minutes can help traders determine when to open or close a position when trading.

Cory Mitchell said that in general, the use of an accurate fractal indicator is to detect two price reversal points, namely:

Detecting a Bullish Turning Point

A bullish reversal pattern is indicated by the 3rd candle having the lowest price level, while the other candles are located higher on either side, forming a pattern like a letter “V” or the letter “U”

Detecting a Bearish Turning Point

A bearish reversal pattern is formed with a 3rd candle having the highest price level and another candle having a lower price level on each side, forming a pattern such as an inverted “V” or letter “U”.

In addition to the functions already mentioned, Cory added that traders can apply fractal indicators to earn profits. Traders can take a long position on a bullish fractal and exit the position when a bearish fractal occurs.

How to Use the Fractal Indicator

Cory Mitchell says that by combining fractal indicators with trend analysis in the market, traders can decide when to buy or sell their assets when trading.

How to Use the Bullish Fractal Indicator

An accurate fractal indicator showing a bullish pattern indicates that the price trend is on the rise. Traders can take a long position, make a purchase at the close of the 5th candle, and place a stop loss just below the lowest price point of the Fractal pattern.

How to Use the Bearish Fractal Indicator

Meanwhile, the fractal indicator which shows a bearish pattern indicates that there is a downward trend in prices. In these conditions, Cory recommends that traders close trading positions. Traders can also place a stop loss just above the highest price level of the Fractal pattern.

How to Use the Fractal Indicator Accurately?

Reporting from the Corporate Finance Institute page, one way to use the fractal indicator accurately is to use it in conjunction with other support or resistance indicators, such as daily pivot points or harmonic patterns to ensure the correctness of the trend reversal signal indicated by the fractal indicator.

For example, when the fractal indicator shows the same high point as the Fibonacci reversal level on the harmonic pattern or MA indicator, the signal given by the Fractal indicator has a high degree of accuracy for the market reversal trend.

That's a detailed explanation about understanding and how to use fractal indicators accurately. Recently, more and more investment instruments have developed and offer quite attractive returns for investors.

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* Disclaimer:

This content aims to enrich the reader's information. Always do some independent research and use cold cash before investing. All activities of buying and selling crypto assets are the responsibility of the reader.

Reference:

Cointelegraph, Ethereum fractal from 2017 that in 7,000% gains for ETH appears again in 2021. Accessed date: 17-11-2021

Corporate Finance Institute, Fractal Indicator. Accessed date: 17-11-2021

IG Markets, How to Trade Using Fractals. Accessed date: 17-11-2021

Investopedia, Fractal Indicator Definition and Applications. Accessed date: 17-11-2021