Williams Fractals for Extremes

17 Nov

This script, written in Pine Script (version 5), implements an indicator for the automatic detection and visualization of fractal extremes on the price chart. The core algorithm is based on Bill Williams' fractal theory and identifies local highs and lows, which are often used to determine potential reversal points and support/resistance levels in the market.

### Key Features:

#### Fractal Detection:
- The indicator identifies a fractal high if the middle candle in a sequence of five candles (two on the left and two on the right) has the highest value.
- A fractal low is identified if the middle candle in the same type of five-candle sequence has the lowest value.

#### Extreme Visualization:
- Fractal highs are displayed as red dots on the chart, signaling potential local peaks.
- Fractal lows are shown as green dots, indicating local troughs.

### Usage:
- The indicator is designed for use across all timeframes and can be applied to both cryptocurrency and traditional financial markets.
- Highlighted points allow traders to quickly spot key levels, aiding in identifying potential zones for trade entry or exit.

### Application in Trading:

#### Identifying Key Levels:
- Fractal highs and lows can serve as resistance and support levels. A breakout beyond a fractal in either direction may signal a continuation of movement in that direction.

#### Finding Reversal Points:
- Fractal extremes indicate potential market reversals, making them useful in counter-trend trading strategies.

#### Adaptability to Market Conditions:
- The indicator updates dynamically with the appearance of new candles, providing traders with real-time fractal extreme levels.

### Settings and Parameters:
- In its current version, the script does not include customizable settings as it implements the standard concept of Williams' fractals.