Bill Williams' Fractals are a technical analysis tool to identify potential reversal points in price trends. A fractal is a specific five-bar pattern that signals a possible change in market direction.

Formation Rules:
Bullish Fractal (Buy Signal):

The middle bar must have the lowest low in the five-bar sequence.

The high of the middle bar must be lower than the highs of the two preceding and two succeeding bars.

Bearish Fractal (Sell Signal):

The middle bar must have the highest high in the five-bar sequence.

The low of the middle bar must be higher than the lows of the two preceding and two succeeding bars.

Key Mechanics:
Fractals appear on all timeframes but are more reliable on higher ones (e.g., daily or weekly charts).

They are often used alongside indicators like the Alligator or Awesome Oscillator for confirmation.

Only the most recent fractal beyond the Alligator’s teeth (a moving average filter) is considered valid for trading.

Fractals help traders spot market turning points, but should not be used in isolation due to false signals.

Bill Williams' fractals highlight potential turning points in the market. They form when price creates a five-candle pattern where the middle candle is the highest high or lowest low. A bullish fractal appears when the middle candle has two lower highs on each side. A bearish fractal forms when the middle candle has two higher lows around it. Traders use these markers to spot shifts in momentum, set breakout levels, or refine entries in trend-following strategies. Fractals often work best when paired with other Bill Williams tools like the Alligator indicator, which helps filter signals in choppy markets. While useful for structure, fractals lag slightly because the pattern is confirmed only after the fifth candle closes.