Only 4 out of the 16 signals generated
were valid by showing the 4th candlesticks as an Inside Day. At this
point we must point out that the fractal arrow is displayed onto the
price chart at the start of the 5th candlestick and not the end, if
the extremes of the 5th candlestick go outside the highs or lows of
the 3rd candlestick, i.e., higher than a bear fractal central
candlestick and lower than a bull fractal central candlestick, the
indicator fractal arrow is removed automatically, and we have a false
signal. The Exit We have a few options to employ when exiting the
trade with this system, and the first one we are going to use is to
close the trade at the end of the day.
Enter a trade just below the low of the
Inside Day Candlestick. Place a stop-loss order just above the high
of the Inside Day Candlestick. Exit the trade at the close of the
day. The second exit strategy to use with the “Daily Fractal
System” is to have a predetermined target of at least the amount of
the risk, i.e., if the stop-loss order is 100 points/pips from the
entry the target should be at least 100 points/pips. You can also use
targets that are twice or 3 times the risk, depending on money
management principles. Another exit strategy that can be used is to
ride the trade until taken out.
When you have entered a long position
after day one, move the stop-loss order to just below the lows of
that day, and keep moving the order up to the lows of the day until
taken out. The reverse applies when in a short position: keep
bringing the stop order down to just above the highs of each day as
the trade moves down. Eventually the trade will be closed out. There
are other exit strategies that can be used, but we will cover just
one more for this trading system: The 2 candle low or high.
From the screenshot above you can see
that on a long trade the low of the last 2 days was used as an exit
point for the trade, and likewise on the short trade the high of the
last 2 days was used. When you employ this 2 day exit strategy it
gives the trade a little more room to manoeuvre and you can ride the
position for longer. The “Daily Fractal Trading System” is
excellent if you can only trade once a day due to other commitments,
but the rules and principles will work on any time frame you choose.
With any trading system practice makes perfect and the best way is to
first practice on a demo account. You must remember a trading system
is a component part of a trading plan and by having a structured,
short, medium and long term plan in place your chances of wealth
building will be greatly increased.
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