Being able to find and then trade patterns that repeat is crucial to your trading success.
Price action in the markets is often repetitive, and you will notice that same high probability patterns tend to repeat time and time again.
This post discusses fractals trading patterns, how fractals can help you identify key market turning points, and how to get free fractals indicators for MT4 and MT5.
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What is Fractals Trading
Fractal patterns are price patterns that repeat time and again.
The word ‘fractal’ comes from the Latin phrase ‘fractus’, which means broken or fragmented.
French-American mathemetician Benoit B. Mandelbrot is known as the father of fractals. Mandelbrot believed that all things have a fractal nature and move in patterns.
Markets such as Forex and stock markets also move in fractals, and learning how to spot and trade these patterns can lead to high probability trades.
Best Setting for Fractals Indicator
The fractals indicator is a repainting indicator, and you can use it to identify potential short-term market reversals. You can also use it to find potential breakout trades. Fractals work on all time frames, and they are a very common pattern.
Fractal patterns can be found using the indicator that Bill Williams created. This indicator is built into MT4 and MT5; however, it does not have all the functions of some other custom-built indicators such as alerts and popups.
The fractal indicator is designed to spot swings high and low for potential reversals. It does this using a simple five candlestick pattern. After you are familiar with fractals, you can start to use these swing points as potential market reversal areas.
When you have added the fractals indicator to your charts, you will be given green up arrows and red down arrows.
The green up arrows and swing high is created with five candles. With this pattern, the middle candlestick is the highest point, and the outer candles both on the left and right have higher lows.
The red down arrows and swing lows are created with five candles but inversed on the flip side. The middle candlestick has the lowest point of the fractal pattern, and the two candles on either side of the middle candle have higher lows. See the chart example below.
What Indicators Work Best With Fractals
Moving averages can be some of the best indicators to use when using fractals.
Two popular moving averages are the 50 periods and 200 period moving averages.
If using the 50 period moving average, you would be looking to see where the price is in relation to the moving average.
If the price is above the 50 period moving average, you would take long bullish trades using the fractals pattern.
If the price is below the 50 periods moving average, you would be looking to take short trades using the fractals pattern,
Using a moving average like this can help you filter out potentially unprofitable trades.
Fractals Indicator for MT4
Fractals indicators are built into MT4 and MT5; however, some more advanced fractals indicators have a few bonuses.
This adjustable fractals indicator for MT4 is a modification of the built-in indicator.
With this indicator, you can change more settings. One of these settings is changing how many bars to use in the pattern. This can be handy depending on if you are a shorter-term or longer-term trader.
You also have the ability with this indicator to change the colors of the up and down arrows to whatever you like.
You can get the fractals indicator for MT4 free here.
Fractals Indicator for MT5
One of the drawbacks of the built-in fractals indicators is that they do not have any alert or notification settings.
It can often be handy to be sent an alert to let you know a certain pattern has formed.
With this MT5 fractals indicator, you can set it up to be notified when a pattern has formed.
You can choose to create alerts for either phone, email, or a popup on the screen.
You can get the fractals indicator for MT5 free here.Note: Don’t know how to install and use these indicators? Read How to Download, Install and Use MT4 and MT5 Indicators.
Lastly on Fractals Trading
You can use fractals indicators in a few different ways, such as reversal or breakout trades.
The easiest way to trade fractals is by themselves, looking for shorter-term market reversals. However, this can come with a downside as there can be false signals.
The best way to use the fractal indicator is to combine it with other popular indicators to filter your trades, such as moving averages. You can also combine your other price action strategies with your fractals.