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Attachments: Easy Fractal Breakout Strategy
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Easy Fractal Breakout Strategy

  • #1
  • First Post: Edited 4:15pm Apr 21, 2009 4:07pm | Edited 4:15pm
I've been demo and live trading breakouts of the fractal channel for about the past month. Results have been pretty good so I thought I'd start a thread about the method and see if anyone is interested in it.

The method is really simple and all you do is buy when price breaks out of the upper channel line and sell when it breaks the lower channel line. I've attached a chart of what I mean as well as the fractal channel indicator I use and another indicator that only shows the last fractals.

Currently I'm only trading this on the EUR/USD 5 min. charts but I was hoping if anyone follows this we can work on trading different pairs and different time frames. As well as tweaking some things and making this a little more discretionary than mechanical.

The next post will show the entry and stop loss rules as I use them now. Once again any suggestions or questions are encouraged and lets see if we can get a good system going here.

Thanks,
trublu
Attached Image (click to enlarge)
Click to Enlarge Name: fractal example.gif Size: 18 KB
Attached File(s)
File Type: mq4 Fractal_Level_Xrust.mq4   6 KB | 9,687 downloads
File Type: mq4 FractalChannel(2).mq4   2 KB | 10,050 downloads
  • #2
  • Apr 21, 2009 4:11pm Apr 21, 2009 4:11pm
So here are the Entry and stop loss rules that I use for now.

Entry: Very simple, buy when breaks through top channel line and sell when breaks though bottom channel line.

Stop Loss: Currently I'm putting the SL at the opposite channel line. For instance on the chart in post 1 if you bought at the blue line you'd have your SL at the red line.

The problems here are sometimes this makes your SL very large and your MM is skewed so that's one thing I need to work on.

Some thoughts I've had are just set it at 10 pips and then move to BE when at +10 and trail stop every 10 pips or something like that. Or maybe have it a little further away at 20 pips or a recent support or resistance level.

Take Profit: I've been taking profit at +10 and moving my SL to BE. The idea is to move your SL up and if you get out at BE no big deal. You want to find a runner and let your profits run.

These are just what I'm using for now and I'm open to suggestions or opinions from anyone.

trublu
  • #3
  • Apr 21, 2009 4:14pm Apr 21, 2009 4:14pm
My goal here is to get some people who enjoy this type of trading and we can tweak some things to make it a profitable system. Some thoughts I've had are:

Only trade in direction of major trend.

As per DIBS rule, buy when above daily open line and sell when below daily open line.

Look at divergence on RSI or MACD and trade off divergence.

Watch out for support and resistance lines as well as round numbers.

These are just some of the ideas I've had and I haven't tested them yet but I plan to and if anyone wants to test any of these please do.

trublu
  • #4
  • Apr 21, 2009 4:17pm Apr 21, 2009 4:17pm
That's all my informational posts for now. If anyone has any questions or suggestions or anything please feel free to ask and if I do any trading tonight I"ll post some recent examples. I might not trade though because I have a cold.

trublu
  • #5
  • Apr 21, 2009 6:09pm Apr 21, 2009 6:09pm
Quoting trublu
That's all my informational posts for now. If anyone has any questions or suggestions or anything please feel free to ask and if I do any trading tonight I"ll post some recent examples. I might not trade though because I have a cold.

trublu
Upon viewing your chart, I only see one trade for the
entire duration. What am I missing?

Rob
  • #6
  • Apr 21, 2009 6:11pm Apr 21, 2009 6:11pm
Quoting ChicagoRob
Upon viewing your chart, I only see one trade for the
entire duration. What am I missing?

Rob
You're missing all the rest of them
There are at least 10 or 12 trades in his first chart.
  • #7
  • Apr 21, 2009 6:37pm Apr 21, 2009 6:37pm
Quoting ChicagoRob
Upon viewing your chart, I only see one trade for the
entire duration. What am I missing?

Rob
As billbss said there are a lot more than 1 trade there. I've attached another chart that shows entry points. Not saying all these are winners or anything just where you would enter. I'll also show where I would normally put the SL.

So you would enter at those green rectangles and at the end of the chart on the right I've shown where you would enter and where I would put the SL for now, until I find a better SL method.

Anymore questions feel free to ask or to post charts of any pair, any time frame, it should work on em all.

trublu
Attached Image (click to enlarge)
Click to Enlarge Name: fractal example2.gif Size: 23 KB
  • #8
  • Apr 21, 2009 6:38pm Apr 21, 2009 6:38pm
Problem with trading simply the breakout is you expect the price movement to be fast. At least, that's how I define a breakout.

My suggestion for using any form of fractal breakout is to determine the previous range, and see if there is long enough consolidation to try and determine if the previous period was a ranging period. I would say every non news-related breakout follows a ranging period. Those breakouts are either false, or they turn into trends.
  • #9
  • Apr 21, 2009 6:41pm Apr 21, 2009 6:41pm
Quoting Ronald Raygun
Problem with trading simply the breakout is you expect the price movement to be fast. At least, that's how I define a breakout.

My suggestion for using any form of fractal breakout is to determine the previous range, and see if there is long enough consolidation to try and determine if the previous period was a ranging period. I would say every non news-related breakout follows a ranging period. Those breakouts are either false, or they turn into trends.
That's something I haven't thought about before, looking at the previous range. Not a bad idea, something to think about. Thanks for the reply.
trublu
  • #10
  • Apr 21, 2009 6:49pm Apr 21, 2009 6:49pm
Put some Bolls in there and see if narrowing of the bands helps indicate the more profitable breakouts.
  • #11
  • Apr 21, 2009 6:53pm Apr 21, 2009 6:53pm
Quoting Accumulation
Put some Bolls in there and see if narrowing of the bands helps indicate the more profitable breakouts.
So is the basic idea that when the bands narrow price is consolidating and forming a smaller range and would probably breakout faster or further?

That's what I think you're getting at, if I'm way off then just let me know. Thanks for the suggestion.
trublu
  • #12
  • Apr 21, 2009 7:23pm Apr 21, 2009 7:23pm
Problem with BB is how do you mathematically define "close"?
  • #13
  • Apr 21, 2009 7:31pm Apr 21, 2009 7:31pm
Quoting Ronald Raygun
Problem with BB is how do you mathematically define "close"?
Bollinger defined it as a "squeeze".

Bandwidth formula:

(Upper Band - Lower Band) / Middle Band

When this reaches a 132 bar low, it's defined as a BB Squeeze.
  • #14
  • Apr 21, 2009 8:23pm Apr 21, 2009 8:23pm
I am obviously a great fan of the breakout. Have you tried different time frames. I would find it very difficult to trade from the 5 min except for scalping.
Zone Breakout Method
  • #15
  • Apr 21, 2009 8:35pm Apr 21, 2009 8:35pm
Quoting PowerTrader
I am obviously a great fan of the breakout. Have you tried different time frames. I would find it very difficult to trade from the 5 min except for scalping.
I did some very quick probably not enough back testing and if I remember correctly the 4hr worked pretty good but I'm kind of drawn to shorter time frames so I thought I'd try out some scalping on the 5 min. and so far it's working pretty good. The only downside is the amount of time you need to be at the computer which is the reason a lot of people dislike scalping.

I was hoping if some people get interested in this thread people we can try out different things. I've got some charts where I'm looking at the 4hr and Daily on a different pairs to see what works out the best. I'm basically demoing everything except 5 min. on the E/U which I'm trading a micro account with and I'm hoping to keep the thread updated with any new findings I get. If anyone does any demoing or back testing on any pair or time frame hopefully they'll share the results here.

trublu
  • #16
  • Apr 21, 2009 8:39pm Apr 21, 2009 8:39pm
Right now there is narrow BB on the 15 min U/CAD. Fractals are very tight. U/CAD not much movement now but keep an eye on possible breakout.
  • #17
  • Apr 21, 2009 8:53pm Apr 21, 2009 8:53pm
Quoting ferndog
Right now there is narrow BB on the 15 min U/CAD. Fractals are very tight. U/CAD not much movement now but keep an eye on possible breakout.
Thanks for the suggestion ferndog, if possible can you guys post a chart of what you're seeing. This way everyone can see what exactly you are talking about.

I'll keep my eye on the USD/CAD that you mentioned. I'll throw some BB on there to see how narrow they are. I never use BB so it's something a little new for me to look at.

trublu
  • #18
  • Apr 21, 2009 9:24pm Apr 21, 2009 9:24pm
Just about to give her a whirl but my chart fractal lines don't appear to be the same as in your chart. I just have a horizontal blue and red elongated line line instead of an enclosing fractal box type line above and below price.
Attached Image (click to enlarge)
Click to Enlarge Name: Fractal.jpg Size: 101 KB
Starting to see instead of just looking.
  • #19
  • Apr 21, 2009 9:30pm Apr 21, 2009 9:30pm
Quoting Rastaman
Just about to give her a whirl but my chart fractal lines don't appear to be the same as in your chart. I just have a horizontal blue and red elongated line line instead of an enclosing fractal box type line above and below price.
Sorry I'm confused about what exactly your asking. Are you asking why I don't have the horizontal lines on my chart? Try to rephrase and maybe I can help you out or maybe someone else knows what you are tying to ask.
trublu
  • #20
  • Apr 21, 2009 9:46pm Apr 21, 2009 9:46pm
trublu are you not using the horizontal lines?

thx,
todd
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