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Fractal Daily Trading

Fractals have a multipurpose use when applied to trading; the amount of trading systems based around this one indicator are too numerous to list.
Fractal Daily Trading

To understand the “Daily Fractal Trading System” first we need to understand how a fractal is generated. A fractal calculates the series of candlesticks over the last 5 days. A bullish fractal occurs when the lowest low of any trading day is represented by the middle candle, with two successively higher trading days on each side. This is seen as a buy signal.
Bull Fractal
Fractal Daily Trading

A bearish fractal occurs when the highest high of the five days is represented by the middle candle, with two successively lower trading days on each side. This is seen as a sell signal.
Bear Fractal
Fractal Daily Trading

The middle candlestick of the series of 5 is the central point of the Fractal, but this is not known until the 5th candlestick starts. When you use the Meta Trader 4 platform or other, the “Bill Williams Fractal” indicator comes as standard.
Fractal Daily Trading

As soon as the 5th candlestick starts, the indicator produces an arrow either above or below the central candlestick depending on whether it`s a bull or bear fractal. Now, when you add the Bill Williams fractals indicator to your chosen price chart it produces lots of arrows, both bullish and bearish, in fact so many you wonder if it is possible to make a valid entry signal out of them at all. We mentioned earlier that the fractal indicator is used in a multitude of different trading systems, either as an entry point or as a trailing stop to maximise profits. The way the “Daily Fractal Trading System” works is to eliminate most of the signals generated and only trade the ones with the highest potential and highest probability of being correct. Take a look at the screenshot below.
Fractal Daily Trading

The fractals highlighted in yellow are the signals we are going to ignore, and those highlighted in green are valid entry points. Out of the 14 fractals on this daily price chart of the GBP/USD, 9 have been discarded, just leaving 5 to be traded. Out of the 5 valid trading signals all of them offered a chance to make money depending on the exit strategy employed with this system. Before we go on with the different exit strategies that can be used with this system, we need to establish how to identify the good from the bad. A valid entry signal The central candlestick is the key to selecting the good trades, and this is dependent on the size of the central candle. Remember, this is a series of 5 candlesticks and the central candlestick is number 3 in the series. What we need to do is identify the size of the 4th candlestick compared to the 3rd candlestick. If the extreme points of the 4th candlestick are within the extreme points of the 3rd candlestick then we have a valid signal. This is commonly known as an “Inside Day”

Fractal Daily Trading Reviewed by learn forex trading on April 05, 2019 Rating: 5

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