Fractal Reverse Engineering Journal

This is my 2nd Journal - Fractal Reverse Engineering.

If a pairs can break, it can reverse also.

This is where I come to think, for my own good in trading journal, let's also documenting down how I would take a trade when there is no Fractal Breaks, but Fractal Reverse is in charging.

The way how I would trade Fractal Reverse would be pretty similar to Fractal Breaks, only reversing. I have just spent last 10 min thinking how I would write down the rules for FR clearly here for my own reference , well I guess my chart would speak for it.

There is some quotes I really like from Hermes Trismegistus, and feel it is suitable to mention here:


the Fourth Principles of the Universe:



Principle of Polarity:
“Everything is dual; everything has an opposite, and opposites are identical in nature but different in degree.” Hermes Trismegistus





“As above, so below, as within, so without, as the universe, so the soul…”



Hooray!

FR #1 potential setup

UJ BUY

Daily Chart (6 Jan)


Daily Chart (7 Jan)
Finally it closed above (Fractal Reverse)


moving down to 1HR


RR=1:2

FR #2
EU Sell

Daily chart


moving down to 1HR


RR=1:2

These few days I been regroup my thinking on Fractals.

I come to the conclusion that Ochuko Fractal break style trading only works for Wedges pattern, and the down side also is in the delay in entering the market which also cause the SL to widen.

When the trend is having it own way - Real breakout - u will know what I mean by looking at GU from last week and UJ, there would not even be any chance to entry.

I like to share a way I see how money flow in the market in regarding to Fractals Break and Reversal ,

Another observation from the previous historical movement of EU last month,

After some thoughts and experiments, this time I am coming back with some better understanding for what I am doing, in conjunction with using Andrew Pitchfork too.

With the help of Andrew Pitchfork, I can see the big cycles and the small cycles, waves within waves

In regarding the use of Reverse Fractal engineering, the major rules are:
Red Dots on the charts represent High Fractal :
- I would only enter a Sell order below it, and place my SL just above the next higher fractal that is above the one I use as entry point.

Blue Dots on the charts represent Low Fractal:
-I would only enter a Buy order above it, and place my SL just below the next lower fractal that is below the one I use as point point.

Risk Management:
I come to realization that (well, I been pondered on this one for a good amount of time) , R:R is just a reference, and no means to be too rigid on it.
Rigid R:R thinking limit my profit growths!

Talking about this, I have tried heaps of different ways for combating the R:R issue. Yes, we do need to have an understanding of what R:R means, however if I am only trading "Set and Forget", I would now feel that I am disrespecting the market flow and totally over assumption on what can happen.

The true for me is that, we can always have our best guess on what is possibly gonna happen next in the market, but market lives in the present, and it is all make up by the collective group of consciousness, especially those who have the strength and power to direct the way it moves toward to.

Government can use their monetary policies to influence the market, and the big institutions can lure people to think what it looks like happening on smaller TF, when the small fishes all dive into the pool, only to found out they have already become the meal for the Big Shark. Usually situation like this can be saved if we have a better idea of what is happening on the bigger cycles that come from weekly and monthly chart.

Therefore, now I have come up with a very simple Risk Management Strategy, the rules are:
-Each entry trade will not have a SL more then 30 pips (that is for intra-day/s)
-Set profit at least 60 pips or more for intra-day trades. Using the simple Break-even EA to trail up into Stop Profit every time wher the next higher up/lower down Fractal broken.

MY 2/3 theory

- Trading winning rates is about 2/3.
-In the 2/3 winning trades, only 1/3 would reach taking 2/3 ~ full profit of targets.
-Expect to trailing up the "Break even" EA roughly 1/3 and 2/3 ratio (eg. move the break even to 7 pips, when the trade is gaining 21 pips) of the move to allow for retrace
- Always pushing higher by pushing higher with the stop profit according to where S/R locate.

Now get higher baby!

EU sell target reached

Entry 1.08303 Exit 1.08811 Gain;+50pips

Thank you Fractals and the Fork

Keep on going, second wave~


Here comes the profit time

Well done Nik, nicely done

There definitely some good learning have done this week. I thanks a lot for the person who walked through it with me, giving me the confident to do better in my tradings.

Let throw some charts in now to see some of my good trades, some almost very good trades , bad trades, and missed trades.

Good Trades :
1) EU Sell

Entered right below the previous high fractal (red dot). Bias: the pairs need to go back down to the white trend line( daily Andrew pitchfork), take the chance there just before the US Jobless Claims announce, expect the news might able to fuel it to go down. We won't know if we don't try

From daily, we can see more clear the red dots form a solid celing.
Profit 80 pips in just one hour.

I want to make like that trade
sharings wonderful ...

Good trades

2)USDCAD Buy
It was a massive sell down after the news, which is doing the completely opposite to what the news does to EU! This again confirm my conspiracy that news is only a tool to move the price but we can never take it for granted for what suppose to be Dovish(so must go up) and what suppose to be Bear(so must go down). It is all about the invisible Forces how to take that news, then the herds would follow.
I like trading from reverse or pullback, I tried to trade breaks but it never give me the satisfaction I can get from trading reverse or pullback, so when UCAD suddenly drop like hell, I did not want to jump into the south train, since this pairs been going up for so long, overall it is still a very bullish trend , if you look at it from a weekly chart angle. So intsead chasing it with many other together, I set a price alert to buy at the price of 1.4238, where it was lots of congestion there. When the price alerted me, I then look into the chart - from 1hr, then down to 15M and 3M, I waited there for another 10 min, and I was convinced that I can buy back up from there for possible 130 pips profit.



since the trade was done in the afternoon NY session after London session closed too, when the price gone up about 60 pips and started shaking, I decided to the profit. As I see from H4, the momentum to buy up was not strong enough to become a pull back for the uptrend, rather it was just a retrace for this new down trend. I am glad I did that, see the Ucad is still on the rally of selling down. Maybe people is getting their looneys out to be ready to buy some oil finally lol.
This trade profit 60 pips in two hour.

Good smaller pips trade:
3) GBPUSD Sell
I took the chance to sell back down to its Weekly and Daily Trend. However when I see the price stagnet on the M3 and wouldn't go any lower then 1.4254, I was smelling something fishy there, so I took the 24pips profit and run~
I am so glad I ran away lol.

See the Bar start to forming a pin right below the historical high fractal , so my bias is it that the buying side have not got enough strength to push through that resistance level. We can see this happening more clear on M5

So good try and have acted prompted , hard earned 24 pips

You must have a special talent
I think I understand the difficult
I guess this is related to technical and volume
What do you think about this picture
Do you think I understood a little bit right...

Hey Gokay, welcome here.

You are 80% correct, but one thing you have to aware is that if the 2 bar to the right did not close with a lower high or higher low repeatedly, it would be a false signal and the Fractal that you see is printing on the chart would then disappeared.
if the second bar to the right is making a lower high repeatedly, then that particular bar will have a high fractal, vice versa,
if the second bar to the right is making a higher low repeatedly, the that particular bar will have a low fractal
So using the latest fractal to determine entry might give a wrong signal (if you didn't wait until the bar close), and the other problem is that using would be a late entry (not a good price anymore) especially on 1H or higher time frame because you would not be able to see that Fractal appears at least after 2 hours(for 1H chart), or 8 hours (for 4H chart) due to the lagging.

So the way I do is to use the historical fractal that on the left hand side to predetermine my entry price around them, then I would set a price alert, when it alerts me, I will look at the chart, within 10 min I will make the decision to enter or not.

But if the setup is seen on the 4H or daily, it is very beneficial to just place an pre-set order for the market to take it once it hits the price.

I am going to show 2 of my missed trades, you would see from there it is pretty safe to do preset order on 4H or Daily timeframe. And it is worth doing because from these TF would produce around 100 pips or more , higher rewards and solid reverse levels.

Good Nik

Fractal Reversal Trading is one of the pieces of ingredient to produce Fruitful Result.

So what is the other pieces?

 

1. TREND.

For Trending, the most reliable and dominate Trend would always shows on the Daily Chart. It means on Lower TF trend changes more often - Example: a breakout pattern produce 40 pips trending up on 1min chart, whilst looking at the same pairs by flipping back to the daily chart, the pairs might just look like some sellers are recovering from profiting. Yet on the 1min chart, it looks like the trend is getting ready for changing its direction.

 

1. Market Range.

Understanding what range the pairs you trading got, can benefit tremendously positioning the entries and exit for each trade.

 

1. Time Duration

Having a target is important, and on top of it, we need to decide a time duration for the order to hit that target. Breakout by news/events driven for moving more than 200 pips in one go does not happen often. Statistically, I would say that only happen 2% of the market trading hours. Let say, if I set an order and expect to gain 200 pips profit as my target, I would give the trade of time duration allowing for one weekly. Vice versa, if I am scalping from algorithm aspect on 1 min chart, I would expect to hit a 10 ~ 20 pips target within 5 minutes.

More about Trend

Trying too hard to catch the bottom of a new trend.

i would confess. this is one of the most fatal mistakes I committed.

Take the example above, see the third chart by circling out some repeat sell down. It is actually less risky (Align with the current bearish trend) , to sell down from those circles, rather then position to buy in at these levels for the "new trends".

Yes, It is nothing wrong to catch a new trend, but before a new trend truly formed, it would go through some rangings, as more orders need to build up the new direction. So Which Trend are you trading from which time frame? Once this concept getting clear, then applying reversal fractal concept become more beneficial.