Fractal Dimension indicator is an innovative VertexFx client-side indicator script that provides entry and exit signals based on the strength of the trend and its direction.
The concept behind the indicator is that during consolidation phase, price moves with a band. As the market starts to trend (either bullish or bearish), the price starts moving towards the Lowest Low (bearish), or away from the Lowest Low (bullish). As a result, the indicator catches this movement and reflects it accordingly on the chart.
To calculate the Fractal Dimension, we use the price field defined by the PRICE_FIELD parameter. In the first step, we calculate the Highest High and the Lowest Low over the recent PERIOD bars. In the second step, we calculated the Smoothed Moving Average of the difference between the price and the Lowest Low over the recent PERIOD bars.
In the third step, we normalize this Smoothed Moving Average over the recent PERIOD bars, to derive the Fractal Dimension indicator.
If the indicator value is above the THRESHOLD value, then the indicator is colored BLUE. On the contrary, if the indicator value is below the THRESHOLD value, then the indicator is colored RED.
Buy: Place Buy position when the indicator has turned BLUE at close of candle. Do not open Buy trade if candle has a gap-up opening. Place stop-loss below the nearest Swing Low or Support level.
Sell: Place Sell postion when the indicator has turned RED at close of candle. Do not open Sell trade if candle has gap-down opening. Place stop-loss above the nearest Swing High or Resistance level.
1) PERIOD - The period over which the indicator is calculated.
2) PRICE_FIELD - The price field used to calculate the indicator. 0 = Close, 1 = Open, 2 = High, 3 = Low, 4 = Median, 5 = Typical, 6 = Weighted.
3) THRESHOLD - The threshold value of the indicator above which the indicator is considered BULLISH, and below which the indicator is considered BEARISH.