There’s an old adage in trading that goes something like “if you try to pick bottoms, you end up with dirty fingers”. You may have also heard people caution against “catching falling knives”. Both of these warn against specifically what the Williams Fractal aims to do.
Simply put, the Williams Fractal aims to detect bottoms and tops and marks them with arrows. Whilst most experienced traders will likely caution against pre-empting market tops and bottoms, when combined with other indicators, the Williams Fractal can provide traders with a valuable tool to complement existing strategies.
The Williams Fractal aims to pick tops and bottoms.
A top is marked by an upward pointing arrow.
A bottom is marked by a downward pointing arrow.
Accuracy can be improved by increasing the chart timeframe (i.e. to weekly).
The Williams Fractal is best used alongside other indicators.
How To Plot The Williams Fractal On The BTSE Platform
Step 1: Load up a chart on the BTSE platform
We’ve chosen to go with a weekly chart
Step 2: Click on the “Indicators” tab or push the “/” key.
Step 3: Select “Williams Fractal” from the drop-down menu.
Step 4: Admire your freshly plotted Williams Fractal
Upward pointing green arrows signal potential tops
Downward pointing red arrows signal potential bottoms
How To Trade Using The Williams Fractal
In general, there is a low probability of picking a top or a bottom. This is because market prices are highly unpredictable most of the time. However, operating on a longer timescale, and combining the Williams Fractal with other indicators, may increase the quality of its signals.
In the chart below, we are using a 9 and 14-week moving average crossover to filter the Williams Fractal signals:
A trader using this combined strategy may:
BUY when the Williams Fractal outputs a red down arrow AND the 9-week moving average is ABOVE the 14-week moving average.
SELL when the Williams Fractal outputs a green up arrow AND the 9-week moving average is BELOW the 14-week moving average.
Note: this is just an example of a combined indicator strategy on a cherry-picked chart and by no means a profitable trading strategy.
For more information about using moving averages, you can check out my Beginner’s Guide to Moving Averages.
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