Fractal Breakout Strategy part 3 - How to use them on intraday trading

ExpertTrading

25 Apr 201004:59

Summary

TLDRPeter from experttrading.co presents a tutorial on utilizing fractals for breakout trades on shorter time frames. He explains that while he doesn't trade fractals directly on daily charts, he uses them for trend confirmation on smaller timeframes. Peter demonstrates how to identify entry points after a fractal breakout, emphasizing the importance of aligning with the trend and using pivot points for trade signals. The video aims to clarify his trading approach and offers practical examples for a better understanding of fractal trading strategies.

Takeaways

📈 The video is about using fractals for breakout trades on shorter time frames, as opposed to higher time frames covered in previous videos.
📊 Peter from experttrading.co explains that he doesn't trade fractals on the daily chart but uses them for trend confirmation on smaller time frames.
📉 He emphasizes the importance of not trading against the trend, and how fractals can be a confirmation tool for trades in the direction of the trend.
🔍 Peter demonstrates a specific example where a fractal breakout above the alligator indicator line on the daily chart signals a potential long trade on a shorter time frame.
📆 The example given is from March 30th, showing a fractal breakout that could have been used to enter a profitable trade.
🧭 He mentions the use of pivot points and the 50-period moving average as part of his trading strategy, especially in a downtrend.
🚫 Peter advises against taking a short trade when the fractal has been broken the previous day, indicating a potential uptrend.
📍 He illustrates how to enter a trade when the price closes above the pivot point, following a fractal breakout.
💰 The video includes a practical example of a profitable trade made by using fractals and pivot points, with specific entry and stop loss points.
🔑 Peter concludes by highlighting the usefulness of fractals for early entry into a trend and riding it for profit.
✉️ The video ends with contact information for further inquiries and resources on experttrading.co.

Q & A

What is the main topic of the video by Peter from experttrading.co?
-The main topic of the video is how to use fractal breakouts on shorter time frames for trading.
What was the reason Peter decided to make this video?
-Peter decided to make this video after receiving an email from someone who enjoyed his previous video but couldn't see how he applied fractals to take trades on daily and 4-hour charts.
Why doesn't Peter take trades on the daily chart as fractals?
-Peter doesn't take trades on the daily chart as fractals because he uses them as confirmation of a new trend or long/short positions on a smaller time frame.
What is the significance of the fractal breaking above the red alligator line according to the video?
-The fractal breaking above the red alligator line signifies an up fractal, which can be a confirmation to take a long trade on a shorter time frame.
What does Peter suggest about trading against the trend?
-Peter suggests that it's generally advised not to trade against the trend, as the trend is your friend, and trading with the trend can be more profitable.
What is the purpose of using fractals in trading according to the video?
-The purpose of using fractals in trading is to get in early on the start of a trend and ride it for profit.
What trading strategy does Peter mention for shorter time frames after a fractal breakout?
-Peter mentions using pivot points as a strategy for trading on shorter time frames after a fractal breakout.
How does Peter determine the entry point for a long trade after a fractal breakout?
-Peter determines the entry point for a long trade by waiting for the price to close above the pivot point and then take out the high of that bar.
What is the importance of the 50 period moving average in the context of the video?
-In the context of the video, the 50 period moving average is not used for trading off when the market is in a downtrend, unlike the pivot points strategy.
What is the recommended stop loss placement according to Peter's example in the video?
-Peter recommends placing the stop loss at a significant low, in his example about 20-25 pips away from the entry, which would require breaking the pivot and the daily low to reach.
How can viewers get more information after watching Peter's video?
-Viewers can get more information by contacting Peter at [email protected] or visiting his website at experttrading.co.

Outlines

00:00

📈 Trading Fractals on Shorter Time Frames

Peter from experttrading.co introduces a video on utilizing fractal breakouts on shorter time frames, as opposed to higher time frames previously discussed. He addresses a viewer's query about the absence of fractal trades in his results on daily and 4-hour charts. Peter clarifies that he uses fractals for confirmation of trends or positions on smaller time frames, demonstrating with a daily chart example where a fractal breakout above the red alligator line signals a potential long trade on a shorter time frame.

📊 Confirmation of Trends with Fractals

The video continues with an explanation of how fractals confirm the start of a trend, allowing traders to enter early and ride the trend. Peter illustrates this with a historical example from March 30th, where a fractal breakout indicated a new uptrend, contrary to the prevailing downtrend. He emphasizes the importance of not trading against the trend and how fractals can provide early entry points for profitable trades.

🎯 Pivot Points and Fractal Strategy

Peter discusses the use of pivot points in conjunction with the fractal strategy, particularly when trading in a downtrend. He explains that instead of using the 50-period moving average, traders can look for a close below the pivot point as a signal for an upward move. Using a specific example from March 31st, 2010, he demonstrates how waiting for a close above the pivot point after a fractal breakout can lead to a successful trade, with the price shooting up significantly.

💰 Profitable Trade Execution

In the final part of the script, Peter describes the execution of a profitable trade using the fractal and pivot point strategy. He details the entry point, the setting of a stop loss at a significant low, and the target profit. The example shows a substantial price increase following the trade entry, highlighting the effectiveness of the strategy and the importance of proper risk management.

Mindmap

Keywords

💡Fral Breakouts

Fral breakouts refer to a trading strategy that utilizes fractals, a technical analysis tool, to identify potential breakout points in the market. In the video, the speaker discusses how to apply this strategy on shorter time frames, which is a shift from the higher time frames discussed in previous content. The concept is integral to the video's theme as it forms the basis for the trading approach being taught.

💡Time Frames

Time frames in trading refer to the duration over which a chart is viewed, such as daily, hourly, or minute-based charts. The script mentions using fractals on both higher and shorter time frames, indicating the flexibility of the strategy and its application in different market conditions. The speaker emphasizes the importance of aligning trades with the correct time frame to maximize the effectiveness of the fractal breakout strategy.

💡Confirmation

In the context of the video, confirmation refers to using fractals not as the sole basis for a trade but as a validating signal that aligns with other indicators or market conditions. The speaker explains that fractals are used to confirm the start of a new trend or a long or short position on a smaller time frame, which is crucial for validating the trade setup and increasing the likelihood of a successful trade.

💡Trend

A trend in trading is the general direction in which the price of an asset is moving. The video emphasizes the importance of trading with the trend, as it is considered more favorable than trading against it. The fractal breakout is used as a tool to identify the beginning of a trend, allowing traders to 'ride' the trend for potential profits.

💡Alligator Indicator

The alligator indicator is a technical analysis tool mentioned in the script, which is used to identify market trends and potential trading opportunities. The speaker refers to it when discussing the up fractal and its relation to the alligator line, indicating that a break above this line can signal a bullish move, which is an example of how the indicator is used in conjunction with fractals.

💡Stop Loss

A stop loss is an order placed by a trader to close a trade at a predetermined level to limit potential losses. In the video, the speaker describes setting a stop loss at a significant low point during a trade, which is a risk management technique to protect profits and minimize losses if the market moves against the trade.

💡Pips

Pips are the smallest price movements in the forex market, typically used to measure the profit or loss of a trade. The script mentions a successful trade resulting in '300 400 Pips,' which illustrates the potential profit that can be achieved by using the fractal breakout strategy effectively.

💡Pivot Points

Pivot points are technical indicators used in trading to predict future price movements based on the average of the high, low, and closing prices from a previous time period. The speaker uses pivot points as a reference for entry points in the trade, specifically looking for a close below the pivot point as a signal for an upward move.

💡Sniper Strategy

The sniper strategy is a trading approach mentioned in the script, which involves trading off the 50-period moving average. Although not the main focus of the video, it is mentioned as an alternative strategy that the speaker has discussed in other content and is not suitable for use during a downtrend, unlike the fractal breakout strategy.

💡Entry and Exit Points

Entry and exit points are critical aspects of trading strategies, indicating when to initiate and close a trade. The video script provides examples of how the fractal breakout strategy can be used to identify entry points, such as when a fractal breaks above the alligator line or when the price closes above a pivot point, and exit points, such as setting a stop loss at a significant low.

Highlights

Peter from expert trading.co introduces a video on using fractal breakouts on shorter time frames.

Previous videos discussed fractals on higher time frames, but this video focuses on shorter ones.

Peter explains he uses fractals for confirmation of new trends or positions on smaller time frames, not for direct trades.

An example is given where a fractal formation on the daily chart is used to confirm a trend on a shorter time frame.

A fractal breakout on the 30th of March is shown as an example of trend confirmation.

The alligator indicator is mentioned for understanding the context of the fractal breakout.

Peter clarifies that he does not trade the fractal breakout alone but waits for a signal on a shorter time frame.

Trading against the trend is discouraged, and fractals are used as a tool to confirm trend entries.

An example from the 31st of March, 2010 is used to illustrate a practical application of the strategy.

Pivot points are discussed as a strategy for trading off them in a downtrend.

A close below the pivot point is identified as a signal for an upwards move in a downtrend.

The importance of waiting for confirmation from the next bar to enter a trade is emphasized.

A specific trade example is detailed, showing how to enter and set a stop loss for profit.

The video demonstrates a profitable trade using fractals without needing time frame alignment.

Contact information and website are provided for more information on the trading strategy.