Low Draw Down Fractal System | Forex Factory

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Attachments: Low Draw Down Fractal System
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Low Draw Down Fractal System

  • #1
  • First Post: Aug 11, 2007 10:29am Aug 11, 2007 10:29am
This one was developed using the free but very effective backtester "Forex Strategy Builder." Here are the results over the past 18 years (since April 1989) net of spread (2 pips) on the EUR/USD:

Number of pips gained: 7401 pips
Maximum drawdown: 362 pips


Rules are very simple:

1. When up fractal appears, go long, exit at the end of the day
2. When down fractal appears, go short, exit at the end of the day

Need to develop a stop loss.

Please note attached equity curve, and provide comments. Let's improve this system.
Attached File(s)
File Type: doc Low Drawdown.doc   123 KB | 5,600 downloads
  • #2
  • Aug 11, 2007 10:36am Aug 11, 2007 10:36am
wow thanks for sharing your strategy.

By the way, i like your desktop theme. Could you please tell me how to make it? thanks
  • #3
  • Aug 11, 2007 10:41am Aug 11, 2007 10:41am
Quoting richy
wow thanks for sharing your strategy.

By the way, i like your desktop theme. Could you please tell me how to make it? thanks
Yes, I think the pros of this system is its simplicity and profitability, the cons are no stop loss. It needs to be developed.

The desktop is just an XP standard desktop.
  • #4
  • Aug 11, 2007 2:53pm Aug 11, 2007 2:53pm
So from the screen shot in the attachment, I assume you are using the 1 day time frame. I set it up with just the basic Fractal indicator that comes with interbankfx MT4. Is this the appropriate setup?


Also according to your rules, "When up fractal appears, go long" you do it immediatly when the little fractal pops onto the screen, you dont wait to make sure it stays or anything.

according to my charts, you only trade once every 3-7 days approximatly.

Is this all correct?

Please let us know.
  • #5
  • Aug 11, 2007 3:05pm Aug 11, 2007 3:05pm
The word document shows a daily chart, however 7400 pips over a period of 18 years amounts to 34 pips per month.
Regards
  • #6
  • Aug 11, 2007 3:10pm Aug 11, 2007 3:10pm
For stop loss , one option would be to use high or low of the fractal bar depending on whether you are going short or long.
Regards
  • #7
  • Aug 12, 2007 8:21am Aug 12, 2007 8:21am
Quoting mcmep11
So from the screen shot in the attachment, I assume you are using the 1 day time frame. I set it up with just the basic Fractal indicator that comes with interbankfx MT4. Is this the appropriate setup?


Also according to your rules, "When up fractal appears, go long" you do it immediatly when the little fractal pops onto the screen, you dont wait to make sure it stays or anything.

according to my charts, you only trade once every 3-7 days approximatly.

Is this all correct?

Please let us know.
Here is the guys answer who developed this system:

Ok. Let start one by one.

1.

I assume you are using the 1 day time frame.

It is right. You can see this here:

Market: EURUSD 1 Day
Spread: 4 pips
Swap Number: 1 pip

2.

I set it up with just the basic Fractal indicator that comes with interbankfx MT4. Is this the appropriate setup?

I think so.
There is more info about how FSB calculates fractals in this post.
This posting describes the same strategy also.

3.

Also according to your rules, "When up fractal appears, go long"

Yes. it is correct.
The entry is determined from the "Opening point of the position" slot only.
There are no additional conditions.
We enter long or short every time when the price touches a fractal's top or bottom.

4.

you do it immediatly when the little fractal pops onto the screen, you dont wait to make sure it stays or anything.

As I wrote before, FSB plots (calculates) a fractal when it is accomplished. It cannot appear and disappear. It is of great importance for the back test whether we have reliable information about the indicators' values when making a deal.

Example:
bar No 1 Highest price - 1.0010
bar No 2 Highest price - 1.0020
bar No 3 Highest price - 1.0030 <-- the top of a fractal up
bar No 4 Highest price - 1.0025
bar No 5 Highest price - 1.0015 <-- the current bar (not accomplished yet)

In this case MT plots a Fractal UP if the current highest price stays below 1.0030, but if the price advances above this level the fractal disappears.
This is not reliable behaviour (According to me of course)
A fractal consists of minimum 5 accomplished bars. Before the end of bar No 5 we ARE NOT SURE about this fractal.
We have to trade after the end of bar 5. In bar 6 we are 100% sure if there is a fractal or there isn't.

To apply this strategy you have to point a fractal's top/bottom that is minimum at the third bar behind the current bar. Safety first!!! :-)

5.

according to my charts, you only trade once every 3-7 days approximatly.

As we can see the example, we have 1 - 2 deals per week.

"Time in position: 13 %"
  • #8
  • Aug 12, 2007 8:23am Aug 12, 2007 8:23am
Yes, isn't that wonderful? With such low draw-down you can increase number of lots quickly and pretty soon each pip is worth a thousand dollars.

Quoting howard
The word document shows a daily chart, however 7400 pips over a period of 18 years amounts to 34 pips per month.
  • #9
  • Aug 13, 2007 1:28pm Aug 13, 2007 1:28pm
Pictures I think could help us here...


Thanks,


CS
  • #10
  • Aug 13, 2007 2:02pm Aug 13, 2007 2:02pm
Quoting trader1976
Pictures I think could help us here...


Thanks,


CS
Sure, here you go, pictures and full explanation:

http://forum.forexsb.com/viewtopic.php?id=124
  • #11
  • Jan 21, 2009 2:19am Jan 21, 2009 2:19am
I'm sorry, why did this system fall off the face of the planet again?
  • #12
  • Jan 21, 2009 7:08am Jan 21, 2009 7:08am
Quoting tdion
I'm sorry, why did this system fall off the face of the planet again?
Probably because the developer was unable to explain his system well enough to teach people how to trade it.

If you understand it well enough to trade, then please explain it and we can get back to testing it.
  • #13
  • Jan 21, 2009 7:43am Jan 21, 2009 7:43am
Ok I just did a quick backtest with all pairs. If we simply put buy/stop and sell/stop orders at the last fractal, and exit at the end of the bar that hits the order, we are quite profitable with low drawdown. We do not need a stop loss because we exit at the end of the bar. "Time" is our stop loss.

Test it out, see what you think.
  • #14
  • Jan 21, 2009 8:05am Jan 21, 2009 8:05am
So if price breaks last 5bar UPfractal we open long pos and close at the end of the bar no metter if we are in profit or in loss?

Did you test manualy? What TF?

It's too simple to be true

Quoting Dreamliner
Ok I just did a quick backtest with all pairs. If we simply put buy/stop and sell/stop orders at the last fractal, and exit at the end of the bar that hits the order, we are quite profitable with low drawdown. We do not need a stop loss because we exit at the end of the bar. "Time" is our stop loss.

Test it out, see what you think.
  • #15
  • Jan 21, 2009 8:09am Jan 21, 2009 8:09am
Just enter buy/stop orders at the last fractal up (if market has not already gone above fractal) and sell/stop orders at last fractal down, and close at the end of day. Daily candles.

Manually take a look and you'll see that the majority are indeed winners and losers are cut short due to "time" stop loss (closing at end of day).

I've entered buy/stops and sell/stops at last fractal on all pairs now, and I will simply monitor at close of day to see if any have triggered and need to be closed, or if I need to move the orders due to a new fractal appearing.

Obviously demo this only until somebody can do some definitive backtesting.

Quoting Dezil
So if price breaks last 5bar UPfractal we open long pos and close at the end of the bar no metter if we are in profit or in loss?

Did you test manualy? What TF?

It's too simple to be true
  • #16
  • Jan 21, 2009 8:25am Jan 21, 2009 8:25am
I coded very similar system some time ago, what this is basically doing is using a "fractal channel" where the channel is always drawn from the last fractal (If i understood correctly).

On my method I used the channel as a breakout method, this method closes trade immediatly after the bar and trailed the order with opposite fractal.

This is quite an interesting approach although I suspect there will be many bars with long wicks that take out the order and then go to loss (because of stops waiting above each peak).

I'll test this method and post the results here later for all majors.

ps. for the person who said too simple, usually the simplest methods work the best
  • #17
  • Jan 21, 2009 8:28am Jan 21, 2009 8:28am
Yes, you're exactly right. Looking at it visually, there are not many bars with long wicks that take out the order and end in loss.

Quoting mikkom
I coded very similar system some time ago, what this is basically doing is using a "fractal channel" where the channel is always drawn from the last fractal (If i understood correctly).

On my method I used the channel as a breakout method, this method closes trade immediatly after the bar and trailed the order with opposite fractal.

This is quite an interesting approach although I suspect there will be many bars with long wicks that take out the order and then go to loss (because of stops waiting above each peak).

I try thismethod...
  • #18
  • Jan 21, 2009 8:34am Jan 21, 2009 8:34am
Just for the record, What times are you using as open and closing times for the market in EST (usa)?

Thanks
kevin
  • #19
  • Jan 21, 2009 9:46am Jan 21, 2009 9:46am
I found support and resistance indicators which will be visually helpful for backtesting and setting-up orders.

TimeFreedom
Attached Image(s) (click to enlarge)
Click to Enlarge Name: fractalchannel_gbpusd_01-21-09_01.gif Size: 16 KB
Click to Enlarge Name: fractalchannel_gbpusd_01-21-09_02.gif Size: 16 KB
Attached File(s)
File Type: ex4 Support & Resistance.ex4   2 KB | 675 downloads
File Type: mq4 Support and Resistance.mq4   2 KB | 901 downloads
  • #20
  • Jan 21, 2009 9:56am Jan 21, 2009 9:56am
You could have 3 days in a row that might open above the most recent up fractal. Do you only trade the first day after it breaks the fractal level, or would you trade all three ?
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