As some traders might know, the classical Fractal indicator offers insight into support and resistance levels and deeper price patterns. The normal Fractal, however, does not capture the price movements in the same way as the proprietary swat.FRACTAL does.
This article explains what the swat.FRACTAL is and how it can be used for analysing and trading the price charts. Learn how and why the swat.FRACTAL levels work the best in the Forex market.
How do you Find the Fractal on the Charts?
The Fractal is an indicator that shows repetitive patterns by spotting critical candle highs or lows. How? A Fractal candle is the candle high or low, which is the highest or lowest within a group of (usually 5) candles.
A Fractal value of two (2) indicates that a fractal will be placed on a candle high and/or low if a candle has the following characteristics:
- Support Fractal is the lowest low of 2 candles to the left and 2 candles to the right.
- Resistance Fractal is the highest high of 2 candles to the left and 2 candles to the right.
- This means that any candle which has a high or low which is the highest or lowest of a group of 5 candles (middle candle and 2 to the left and 2 to the right) will be a candle with a Fractal.
What is the swat.FRACTAL?
In our view the key Fractal level for the Forex market is 5 or 6 (max 7) and not 2.
Although the Fractal value 2 retains value for all financial markets and charts, for the Forex market specifically we prefer using the Fractal 5 or 6.
The Fractal value 2 does (probably) offer the most value for daily charts in the stock market and stock indices so it depends what markets you trade.
The swat.FRACTAL is specifically built for the MT4 platform, although traders can use the logic behind the swat.FRACTAL on all charts.
The swat.FRACTAL uses colors and symbols to quickly transmit information about the structure of the market.
The swat.FRACTAL changes color and symbols depending on its relationship versus the MAs.
What is the Special Characteristics of the swat.FRACTAL?
Let’s first explain what information the shape of the Fractal indicator indicates.
- Diamonds indicate trend:
- Above the candle indicates uptrend.
- Below the candle indicates downtrend.
- Circles indicate bouncing spots within the trend:
- Above the candle indicates downtrend.
- Below the candle indicates uptrend.
Also the color of the Fractal indicator offers valuable information.
Diamond in uptrend: a green diamond above a candle indicates Fractals away from 21 ema zone (see image below):
- Green diamond indicates uptrend.
- Light green diamond indicates pullback in uptrend (at least 6 candles failed to break candle high).
- Blue diamond indicates either a warning or deeper retracement in uptrend.
Diamond in downtrend: a red diamond below a candle indicates Fractals away from 21 ema zone (see image below):
- Red diamond indicates downtrend.
- Pink diamond indicates pullback in downtrend (at least 6 candles failed to break candle low).
- Orange diamond indicates warning or deeper retracement in downtrend.
Circles in uptrend: an orange circle below the candle indicates a bigger bearish retracement because these are Fractals that appear in between the 21 ema zone and 144 ema close (see image below):
- Light pink: light pullback in uptrend
- Red: light pullback in uptrend
- Orange: deeper pullback in uptrend
Circles in downtrend: a dark blue circle above the candle indicates a bigger bullish retracement because these are Fractals that appear in between the 21 ema zone and 144 ema close (see image below):
- Light/dark green: light pullback in downtrend
- Light/dark blue: deeper pullback in uptrend
Circles around 144 ema: black and grey circles indicate Fractals around the 144 ema close:
- Black: first Fractal that is at the 144 ema close (first break attempt)
- Grey: second Fractal that is at the 144 ema close (retest)
Using the swat.FRACTALS
The swat.FRACTALS help traders understand the structure of the chart quickly because the indicators convey multiple data points. All of this is explained in our course called SWAT – simple wave analysis and trading.
- Standard Fractal information:
- Support and resistance levels.
- Filtering out setups.
- Breakout spots / trades.
- Bounce and reversal spots / trades.
- Extra ECS information:
- Green diamond above candles.
Resistance Fractal in/above 21 ema.
Resistance Fractal within momentum (no 6 candles left/right).
- Light pink/red circles below candles.
- Red diamond. Fractal in/below 21 ema.
- Support Fractal in/below 21 ema.
- Support Fractal within momentum (no 6 candles left/right).
- Light green/blue circles above candles.
- In uptrend: light green diamond. 6 candles failed to break high but Fractal in/above 21 ema.
- In downtrend: pink diamond. 6 candles failed to break low but ut Fractal in/below 21 ema.
- In uptrend: orange circles below candles:
- Support Fractal after correction (more than 6 candles left/right).
- Support Fractal above 21 ema but below 144 ema.
- In downtrend: dark blue circles above candles:
- Resistance Fractal after correction (more then 6 candles left/right).
- Resistance Fractal below 21 ema but above 144 ema.
- Black or grey circle Fractal around 144 ema remains unbroken and is used as support for bounce.
- In uptrend: price is breaking below the black or grey circle Fractal support around the 144 ema.
- In downtrend: price is breaking above the black or grey circle Fractal resistance around the 144 ema.
For more information, free analysis, webinars, videos, tools, systems, and methods for trading stocks, cryptos, Forex and options, please check out our website www.EliteCurrenSea.com.
Wish you good trading,