Neo's Divergence Fractals

20 juin 2022

Divergence Fractals combine divergence candlestick patterns with concepts pioneered by Bill Williams and George Lane to create a precise trend following tool that responds very well to the FX market. This indicator is built off of my Neo Fractal data set, which unlike traditional Williams fractals, track highest and lowest closes instead of higher highs and lower lows. Through my own research, I've found Neo Fractals to be a much more accurate way of pinpointing %K and RSI extremes than Williams fractals, especially in scenarios where markets make higher highs or lower lows, but fail to close higher or lower. This can lead to false divergence signals because the stochastic and RSI values aren't referenced at their highest or lowest point.

If divergence is detected between the previous close and the closest fractal above or below the close, the script then waits for a close above (bullish), or below (bearish) the close where divergence was present, at which point, an up (bullish) or down (bearish) fractal will appear on the chart. Divergence signals followed by engulfing candles are also colored, so they're easy to spot. These are the highest quality reversal or in some cases trend continuation signals! Divergence Fractals can be a great entry tool, but can also be great for managing and closing active trades as well. This indicator was designed to work in tandem with my %K as well as my proprietary Lucky7 indicator, mainly on the 1HR chart.