What Is Fractal?
In technical analysis, a fractal is a price pattern that recurs across multiple timeframes in a self-similar manner. The same patterns visible on a 5-minute chart also appear on daily and weekly charts. Bill Williams defined a specific fractal indicator: a bar with a higher high (or lower low) than the two bars on either side, marking potential turning points.
How Fractal Works
Fractal theory suggests that market behavior is scale-invariant — the same forces (fear, greed, supply, demand) create similar patterns whether you're looking at a 1-minute candle or a monthly candle. This has practical implications: the same trading techniques work across timeframes, and a pattern on a higher timeframe has more significance because it represents more market participants.
Why It Matters for Traders
Fractal analysis is useful for multi-timeframe analysis: identifying higher-timeframe fractals (turning points) provides context for lower-timeframe entries. A fractal high on the weekly chart followed by a fractal low on the daily chart creates a higher-timeframe bearish framework within which you can look for short entries on the hourly chart.
