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Easy Fractal Breakout Strategy

  • #41
  • Apr 23, 2009 8:59pm Apr 23, 2009 8:59pm
Quoting trublu
Thanks for the suggestions Rastaman and Limstylz, looks like I have some things to try out.

Question about how you use the MA indicator Rastaman, do you just go long if it's green and short when it's red or is there something else to it? Sorry if that's a dumb question.

Thanks for that other fractal channel indicator Limstylz it looks pretty cool. Figuring out a profit target is always a tough thing to do, do you remember what you were using as a stop loss with this indicator?

Thanks again guys for the help.
trublu

Sorry, Missed that post.

I just use the Non Lag MA to keep me in a trade or warn when it is starting to go in the opposite direction. The BB Flat Indi, shows you when things are starting to move into a breakout or trend, and it also shows when ranging is going on.
Starting to see instead of just looking.
  • #42
  • Apr 24, 2009 3:25am Apr 24, 2009 3:25am
Ok, here you go. Last night when I put up the charts I saw the breakout on the Eur 4 HR.

Here's ONE way to trade it.
Attached Image(s) (click to enlarge)
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Click to Enlarge Name: Eur_4Hr_2.jpg Size: 124 KB
  • #43
  • Apr 24, 2009 3:33am Apr 24, 2009 3:33am
Using just the 4 Hr, the first target is at 1.3189 and entry would be 1.3050. IF you set your stop at the other side of the channel, you'd get just about a 1:1 trade.

However, you can move down to the Hourly. Using the same entry spot from the 4 Hour at 1.3050 you then find the last Fractal on the Hourly and use that for the next measured move. That would put the bottom of the channel at 1.2979.

Now, if you set your SL at 1.2979 and your first TP is still the 100% from the 4 Hour, you're now looking at 71 pips risk and 139 pips potential target which is just about a 1:2 trade. Much better trade to take.

Keep in mind what's happening here. It's a breakout and if it comes back almost halfway in the channel, it's probably a safe assumption it was a false breakout. There's no need to use the entire 4 Hour channel to get this information.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Eur_4Hr_3.jpg Size: 131 KB
Click to Enlarge Name: Eur_Hr_1.jpg Size: 155 KB
  • #44
  • Apr 24, 2009 3:50am Apr 24, 2009 3:50am
Now another way to play this, and I know it works, but it takes huge patience, is to trail the measure moves.

Look at this Hourly chart. Once it broke-out it moved up to 200% line, then came back 85 pips putting a lot of heat on the trade from THIS PERSPECTIVE. If you were watching the 4 Hr, it doesn't look so bad even though the numbers are the same.

Here's the rule if you are watching from the Hourly.

Once price actually touches the 200% line, move your stop to the 100% line. Once it hits the 300% line, move your stop to the 200% line, etc. If you were doing this right now, you'd have your stop locked in at 1.3208 as it just hit the 500% line.

Or you could just take the whole thing off at the 1.3189 line from the 4 Hour.

Either way, it's a good return. However, this takes lots of patience because many, many times price will do what it did at the beginning of this trade, run up close to a line but not touch it, then come back on you, then go back in the original direction.

Measured moves work just nicely, but you've got to put some time into them. I've found trailing them works pretty well, but on every time frame there seems to be an average. Find the average for the TFs. I've found that once I know the average, I can then identify the best place to take the whole thing off once it hits that target.
Attached Image (click to enlarge)
Click to Enlarge Name: Eur_Hr_2.jpg Size: 144 KB
  • #45
  • Apr 24, 2009 3:53am Apr 24, 2009 3:53am
I'll bet dollars to doughnuts, that people will want to take this very simple idea, and drown it in indicators to eliminate the "Bad" trades. I suggest that it's more worthwhile to thoroughly investigate the idea as it is without anything else until one fully understands it. Then fuck it up.
  • #46
  • Apr 24, 2009 4:30am Apr 24, 2009 4:30am
Hi Dopey,

I was playing the fractal channel breakouts in a similar manor to you except that my profit targets were bigger and I was using trendline SR on smaller time frames to determine stops rather than "drilling down" with fibs.

You are correct, I too tried every indicator I could find to perfect my entry and exit and reduce noise. In then end, after about 3 weeks of fruitless changes, I reverted just using the fractal indicator I edited as I could not get as consistent results as I did when I didn't fuck about with it.

I recommend forward testing any system as is for at least a month (after using forex tester or similar for about a years worth of back data) before 'tweaking', as you cannot truly ascertain the value of any system without this and especially if you start watering it down with indicators you have never used before and don't understand.

Quoting Dopey
I'll bet dollars to doughnuts, that people will want to take this very simple idea, and drown it in indicators to eliminate the "Bad" trades. I suggest that it's more worthwhile to thoroughly investigate the idea as it is without anything else until one fully understands it. Then fuck it up.
  • #47
  • Apr 24, 2009 6:58am Apr 24, 2009 6:58am
Thank you for those charts Dopey, looks very good. Now I have some things to test with higher TF's, I've looked at them before but I couldn't figure out a good way to set profit targets or stops so thank you again. I also agree about not using a bunch of indicators to try and filter trades, the fractal channel is simple, that's why I'm using it.

trublu
  • #48
  • Apr 24, 2009 7:22am Apr 24, 2009 7:22am
Quoting trublu
Thanks for the indicator I'll check it out. I just wanted to say one thing about fractals repainting. I know a lot of people don't put any faith in fractals because they repaint or redraw. The problem is people don't wait for the 5th bar to close. If you are looking at your charts and the fifth bar is still open the 3rd bar will probably show a fractal but it is not confirmed until the 5th bar closes.

So if you are trading the breakout of a fractal's high or low you need to wait for 2 more bars to close (the 5th bar) before you trade or else...
hie trublu..
thanks for ya method of trading,i have problem to understand about the 5th bar to close,can u explain more details about it with some screenshot to get a clear picture of it,sorry for bad english

many thanks in advance..
  • #49
  • Apr 24, 2009 10:05am Apr 24, 2009 10:05am
Quoting bexterlone
hie trublu..
thanks for ya method of trading,i have problem to understand about the 5th bar to close,can u explain more details about it with some screenshot to get a clear picture of it,sorry for bad english

many thanks in advance..
I'm not at my main computer so I don't have my charts with me but here is a pic of a fractal from the web I found. I tried to edit it in Paint but it's not that great looking.

Basically you must wait for the 5th bar to close or the bar that I marked as a fractal will no longer be a fractal. A way to look at it is a fractal must have 2 bars next to it on both sides that are lower than it if you are talking about an up fractal which I show in the picture. The reverse is true for a down fractal.

That's the best I can do for now, I'll post a better pic with my actual charts in a couple of hours when I'm at my main computer.

trublu

PS. your english is fine
Attached Image
  • #50
  • Apr 24, 2009 3:22pm Apr 24, 2009 3:22pm
Here is one of my real charts showing the 5th bar breaking the high of the "would be fractal".

The bar I highlighted with the green rectangle is the 5th bar of the fractal formation. If it closed below the high of bar 3 then it would have been a fractal. The #'s are the 5 bars needed to form a fractal. Since 5 got higher than 3, 3 is not a fractal.

The tricky thing is if you were watching your charts while bar 5 was the current bar, bar 3 would show a fractal indicator but it would disappear when the high was broken. That's why you must wait for bar 5 to close before you trade the breakout.

Hopefully that makes sense, I don't think I'm very good at explaining it. If it's still not clear let me know and I'll try again.

trublu
Attached Image (click to enlarge)
Click to Enlarge Name: fractal example.gif Size: 18 KB
  • #51
  • Apr 26, 2009 10:55am Apr 26, 2009 10:55am
I did a little back testing on trading the 5 min breakouts and it's just too much trading for me so I'm going to only trade 15 min breakouts but I'm going to use the indicator that Lim posted I think where it shows the 15 min fractal channel on the 5 min chart. I'm going to forward test this week and I'm leaving my SL at the other channel and setting first TP for 10 and I'm going to pull the fibs and mark other targets at the measured moves like Dopey suggested.

I'm also going to try and take some 4 hour trades using the measured moves for profits as shown in Dopey's charts.

There are still some other things I want to look at such as trading with major trend, in direction of daily open lines and not trading around previous SR and round numbers. All some things I need to look at but it's going to take some time.

trublu
  • #52
  • May 3, 2009 3:52am May 3, 2009 3:52am
I have been testing Mikkom's Stophunter D1 tf which uses two fractals, the upper and lower fractal at which a buy stop and sell stop are placed.

Buying if upper fractal is broken and selling if lower fractal is broken. TP 1 D1 bar plus 20 pips.
He puts the SL for both orders at the 50% fibo mark which seems to do the trick on D1. You may want to try this on the H4. I am currently testing this.

Actually, your system and his are quite similar. Interesting.
Attached Image (click to enlarge)
Click to Enlarge Name: Frac.jpg Size: 92 KB
Starting to see instead of just looking.
  • #53
  • May 3, 2009 9:45am May 3, 2009 9:45am
Quoting Rastaman
I have been testing Mikkom's Stophunter D1 tf which uses two fractals, the upper and lower fractal at which a buy stop and sell stop are placed.

Buying if upper fractal is broken and selling if lower fractal is broken. TP 1 D1 bar plus 20 pips.
He puts the SL for both orders at the 50% fibo mark which seems to do the trick on D1. You may want to try this on the H4. I am currently testing this.

Actually, your system and his are quite similar. Interesting.
Thanks for showing us that Rasta. I'll have to read that thread, looks like the same thing I'm looking at but on higher TF's, interesting indeed.

trublu
  • #54
  • Jul 20, 2009 2:34am Jul 20, 2009 2:34am
Any further news on this method?

Thanks

Forex37
  • #55
  • Jul 20, 2009 7:45am Jul 20, 2009 7:45am
Quoting Forex37
Any further news on this method?

Thanks

Forex37

I've been using it on the 4 hour for the past couple of weeks and it's been doing pretty well. But I'm not only playing the breakout of the fractal channel I've been taking reversal trades as well. I'll put up a chart later that explains what I'm talking about. For now I'm just setting my TP and SL at 30 pips but maybe people can do some testing and see if there is a way to trail it to get more than 30 pips. I'll put the chart up when I get a chance.

trublu
  • #56
  • Jul 20, 2009 8:09am Jul 20, 2009 8:09am
I attached a chart showing where you would enter for a reversal trade. Basically you enter after the 4th bar in the fractal formation.

Remember when you trade breakouts you need to wait for the 5th bar of the fractal formation to close to confirm it really is a fractal. If you are trading reversals however you want to open your trade on the 5th bar. It's a little riskier because this means the fractal is not confirmed but it gets you into runs early.

As I said before I'm just using TP and SL at 30 pips and still trying to find a way to catch longer runs.

If you want to read more on fractal reversals read The System (Irony Included) thread started by Feb2865. It's a really good thread and where I first learned of fractals.

Thanks,
trublu
Attached Image (click to enlarge)
Click to Enlarge Name: fractal 2.gif Size: 22 KB
  • #57
  • Jul 20, 2009 8:31am Jul 20, 2009 8:31am
Maybe a volume indicator may help to show you how much money is in the market before you take the break.
Normalized volume indicator or Chaikin might do it.
Attached Image (click to enlarge)
Click to Enlarge Name: g.gif Size: 35 KB
Attached File(s)
File Type: ex4 Normalized_Volume_Oscillator.ex4   4 KB | 1,097 downloads
File Type: mq4 CHO.mq4   3 KB | 1,123 downloads
Starting to see instead of just looking.
  • #58
  • Jul 20, 2009 8:43am Jul 20, 2009 8:43am
I am looking at this on the H1 tf with a fibo expansion to show possible tp.
Attached Image (click to enlarge)
Click to Enlarge Name: g.gif Size: 24 KB
Starting to see instead of just looking.
  • #59
  • Edited 9:55am Jul 20, 2009 9:22am | Edited 9:55am
Here is an oldie but a goodie. The support and resistance indicator. A Fractal indicator that I use in my trading...
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd_15min_20090720.gif Size: 11 KB
Attached File(s)
File Type: mq4 Support_and_Resistance.mq4   2 KB | 1,638 downloads
EllisEdi Moving on to my next trade ...
  • #60
  • Jul 20, 2009 11:46am Jul 20, 2009 11:46am
Thanks for the volume suggestion rasta, never really looked at volume before. To be honest I'm not sure even how the fib expansion works, never thought of it before to plan targets. For now just using 30 for TP and SL has been working for me but there is no real thought put into it, just a static number I picked. Definitely need to work on catching runs and figuring out a better way to define TP/SL.

Thanks Ellis for the other indicator, how do you trade off it exactly if you don't mind me asking? Breakouts or reversals?

trublu
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