# Fractals Indicator – How to use the Fractals Indicator?

## What are fractals?

Fractal geometry, defined by mathematician Benoit Mandelbrot,  is a geometric figure that can be decomposed into parts, each one of these parts identical on a smaller scale to the original figure. However, the “fractal finance” applied to technical analysis is a geometric pattern that can be observed regardless of the time frame used, either 1 hour, 30, 15 or 1 minute. There are some books on this subject and one of the most popular is “Trading Chaos” that was written by Dr. Bill Williams. In this book, Dr. Williams entered two important concepts, the  “Fractal UP” and “Down Fractal”,  which can be used as support and resistance respectively.  When both formations are crossed by the price, that indicate new levels for prices in both bull and bear markets.

The “Fractal Up” (it indicates a possible resistance), defined by Williams (Using a bar chart) is one pattern where the central bar has a maximum price that is greater than the maximum of the two bars to the right and higher than the maximum of the two bars on the left. On the other hand, the “Fractal Down” (it indicates a  possible support) is one pattern where the central bar has a minimum price that is less than the minimum of the two bars to the right and less than minimum of two bars on the left. We can observe the ideal fractal in the image:

However, there are different patterns that can be used, such as:

### Fractal characteristics

• Fractals shall be composed of at least 5 bars . It’s like our hand. The middle finger is higher than the two fingers on the right and the two fingers on the left. If we turn our hand with the middle finger perpendicular to the ground, then we have the middle finger lower than theto two fingers on the left and the two right fingers.
• Fractals are present in every movement in the market, both bull and bear markets.

Fractals are important to draw trend lines in the Forex market. When we draw a line between  two fractals we can identify key supports and resistances in the market. Fractals can be very useful combined with other indicators.

If we use the fractals in its pure form without any other indicator, the interpretation is as follows:

### How to interpretate fractals?

1. A downtrend is indicated by a maximum candle/bar  or a group of maximum candles/bars having at least 2 lower maximum candles on each side of the formation.
2. An uptrend is indicated by a minimum candle/bar  or a group of minimum candles/bars having at least 2 higher minimum candles on each side of the formation.
We can interpret the fractal as follows:
• Formation of a downtrend: In this case the fractal form crests. Remember the hand?. The middle finger is the highest. A crest indicates that the price will go down.
• Formation of an Uptrend: In this case the fractals form valleys Remember the hand with the middle finger pointing towards the ground at right angles?. A peak pointing down indicates that the price will go up.
In the trading plataform Metatrader 4 the fractal are used as an indicator as follows: