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FractalChannel_Stop

This is a discussion on FractalChannel_Stop within the Trading tools forums, part of the Trading Forum category; Hi, Please pay attention to one more indicator from the SAR category - FractalChannel_Stop, the first version of which I ...

          
   
  1. #1
    Developer igorad's Avatar
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    FractalChannel_Stop

    Hi,

    Please pay attention to one more indicator from the SAR category - FractalChannel_Stop, the first version of which I developed for MT3 in 2004.
    In this version you can find the new important parameter - Ratchet:
    • < 0 - stops follow by the Fractal Channel strictly
    • = 0 - stops move in one direction(similar to old versions)
    • > 0 - stops follow by the channel with FractalSize of which will gradually decrease with each new HH/LL for uptrend or downtrend respectively.


    Please note this parameter can be a fractional value, for example, if it's equal 0.25 then the FractalSize will decrease every 4 HH bar for uptrend.

    Code:
    extern int     TimeFrame            =     0;    //TimeFrame in min
    extern int     UpBandPrice          =     2;    //Upper Band Price(ex.2 for High)     
    extern int     LoBandPrice          =     3;    //Lower Band Price(ex.3 for Low) 
    extern int     FractalSize          =     2;    //Fractal Size in bars (ex. 1-3 bars,2-5 bars,3-7 bars)
    extern double  Risk                 =     0;    //Channel Narrowing Factor(0..0.5)   
    extern double  Ratchet              =   0.0;    //Ratchet(-1-off,>= 0-on) 
    extern double  MoneyRisk            =  1.00;    //Offset Factor(eg.1.2)
    
    extern int     SignalMode           =     1;    //SignalMode: 0-off,1-on 
    extern int     LineMode             =     1;    //Line mode : 0-off,1-on  
    extern int     DotMode              =     1;    //Dot mode  : 0-off,1-on  
    extern int     BarsMode             =     1;    //Bars mode : 0-off,1-on  
    
    extern string  alerts               = "--- Alerts & Emails ---";
    extern int     AlertMode            =     0;
    extern int     SoundsNumber         =     5;    //Number of sounds after Signal
    extern int     SoundsPause          =     5;    //Pause in sec between sounds 
    extern string  UpSound              = "alert.wav";
    extern string  DnSound              = "alert2.wav";
    extern int     EmailMode            =     0;    //0-on,1-off   
    extern int     EmailsNumber         =     1;    //0-on,1-off
    FractalChannel_Stop-fractalstop_2.gif


    Regards,
    Igor
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    Nodp53, Iamfree, zilliq and 1 others like this.

  2. #2
    Administrator newdigital's Avatar
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    I was trying to find some original developing articles etc related to Fractal Channels but sorry - I did not find any. I think - Fractal Channel (on the way it was developed for many years) - this is invention of Igorad. So, am posting some article which I found which may be slightly related to this indicator, and which can provide some idea for you concerning how this indicator can be used about.




    Stop and Reverse (SAR)

    A Trader's Guide To Using Fractals

    Many people believe that the markets are random. In fact, one of the most prominent investing books out there is "A Random Walk Down Wall Street" (1973) by Burton G. Malkiel, who argues that throwing darts at a dartboard is likely to yield results similar to those achieved by a fund manager (and Malkiel does have many valid points).

    However, many others argue that although prices may appear to be random, they do in fact follow a pattern in the form of trends. One of the most basic ways in which traders can determine such trends is through the use of fractals. Fractals essentially break down larger trends into extremely simple and predictable reversal patterns. This article will explain what fractals are and how you might apply them to your trading to enhance your profits.

    What Are Fractals?

    When many people think of fractals in the mathematical sense, they think of chaos theory and abstract mathematics. While these concepts do apply to the market (it being a nonlinear, dynamic system), most traders refer to fractals in a more literal sense. That is, as recurring patterns that can predict reversals among larger, more chaotic price movements.

    These basic fractals are composed of five or more bars. The rules for identifying fractals are as follows:
    • A bearish turning point occurs when there is a pattern with the highest high in the middle and two lower highs on each side.
    • A bullish turning point occurs when there is a pattern with the lowest low in the middle and two higher lows on each side.

    The fractals shown in Figure 1 are two examples of perfect patterns. Note that many other less perfect patterns can occur, but the basic pattern should remain intact for the fractal to be valid.


    FractalChannel_Stop-fractals_1.png

    The obvious drawback here is that fractals are lagging indicators - that is, a fractal can't be drawn until we are two days into the reversal. While this may be true, most significant reversals last many more bars, so most of the trend will remain intact (as we will see in the example below).



    Applying Fractals to Trading

    Like many trading indicators, fractals are best used in conjunction with other indicators or forms of analysis. Perhaps the most common confirmation indicator used with fractals is the "Alligator indicator", a tool that is created by using moving averages that factor in the use of fractal geometry. The standard rule states that all buy rules are only valid if below the "alligator's teeth" (the center average), and all sell rules are only valid if above the alligator's teeth.

    Figure 2 is an example of such a setup:


    FractalChannel_Stop-fractals_2.png

    As you can see, the primary drawback to this system is the large swings that take place. Notice, for example, that the latest fractal had a drawdown of over 100 pips and still has not hit an exit point. However, there are countless other techniques that can be applied in conjunction with fractals to produce profitable trading systems.

    Figure 3 shows a forex trading setup that uses a combination of fractals (multiple time frames), Fibonacci-based moving averages (placed at 89, 144, 233, 377 and their inverses) and a momentum indicator. Let's look at a recent trade setup for the GBP/USD currency pair to see how fractals can help:


    FractalChannel_Stop-fractals_3.png

    Here is a basic rule setup that is used when using a chart with a four-hour time frame:

    • Initiate a position when the price has hit the farthest Fibonacci band, but only after a daily (D1) fractal takes place.
    • Exit a position after a daily (D1) fractal reversal takes place.


    Notice how the fractals pinpoint meaningful tops and bottoms? This helps to take the guesswork out of deciding at which Fibonacci level to trade - all we have to do is check to see if the daily fractal occurred. We should also note that the trend strength began increasing at the sell fractal, and topped at the buy fractal. Although we lose some pips with the confirmation, it saves us from losing out on mere market noise - 139 pips certainly isn't bad for three days! (For further reading, see Trading Without Noise.)

    Things to Consider

    Here are a few things to remember when using fractals:

    • They are lagging indicators. They are best used as confirmation indicators to help confirm that a reversal did take place. Real-time tops and bottoms can be surmised with other techniques.
    • The longer the time period (i.e. the number of bars required for a fractal), the more reliable the reversal. However, you should also remember that the longer the time period, the lower the number of signals generated.
    • It is best to plot fractals in multiple time frames and use them in conjunction with one another. For example, only trade short-term fractals in the direction of the long-term ones. Along these same lines, long-term fractals are more reliable than short-term fractals.
    • Always use fractals in conjunction with other indicators or systems. They work best as decision support tools, not as indicators on their own.


    Conclusion

    As you can see, fractals can be extremely powerful tools when used in conjunction with other indicators and techniques, especially when used to confirm reversals. The most common usage is with the "Alligator indicator"; however, there are other uses too, as we've seen here. Overall, fractals make excellent decision support tools for any trading method.

    Resources

    These are the two main charting packages that contain fractals:

    • MetaTrader for forex
    • TradeStation for equities (via plug-in)


    If you want to know more about chaos theory and its applications in the marketplace, an excellent book on the topic is "Profiting From Chaos" (1994) by Tonis Vaga.

  3. #3
    Administrator newdigital's Avatar
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    This FractalChannel_Stop_v5 may be good with CMO indicator (attached) :


    FractalChannel_Stop-eurusd-m15-ibfx-inc.png



    and with ColoredMACD with alerts indicator (attached too) :


    FractalChannel_Stop-eurusd-m15-ibfx-inc-2.png
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  4. #4
    Administrator newdigital's Avatar
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    This is example of one trade (USDCHF M15 timeframe) with this indicator + CMO_v1 (default settings for both). This is +11 pips for now (I opened buy trade) :


    FractalChannel_Stop-usdchf-m15-ibfx-inc.png
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  5. #5
    Administrator newdigital's Avatar
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    This is updated situation (EURUSD and USDCHF, M15, FractalChannel_Stop_v5 and CMO_v1 with default settings) :


    FractalChannel_Stop-eurusd-m15-ibfx-inc.png



    FractalChannel_Stop-usdchf-m15-ibfx-inc-2.png



    FractalChannel_Stop-usdchf-m15-ibfx-inc-3.png
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  6. #6
    Administrator newdigital's Avatar
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    Stop loss was moved - and it is update for now :


    FractalChannel_Stop-eurusd_1812_update.png



    FractalChannel_Stop-usdchf_1812_update.png
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  7. #7
    Administrator newdigital's Avatar
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    This is strange but the price is going exactly in top/bottom on the way of CMO_v1 indicator.
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  8. #8
    Administrator newdigital's Avatar
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    It is what I am talking about - a lot of pips in profit - look at the images (120 pips in profit):


    FractalChannel_Stop-usdchf_1912.png



    FractalChannel_Stop-eurusd_1912.png
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  9. #9
    Administrator newdigital's Avatar
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    Those 2 trades (for EURUSD and USDCHF) were closed :

    FractalChannel_Stop-fractal_closed.png



    and I opened the other trade today for USDCHF and it is in profit for now :

    FractalChannel_Stop-fractal_1812.png
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  10. #10
    Administrator newdigital's Avatar
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    102 pips in profit :


    FractalChannel_Stop-100_2012.png
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