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# Strategy Based on the Fractal Channel

Published: 15 October 2018 Updated: April 21, 2023

The range of integrated indicators in INTRADE.BAR platform is presented in the form of more than 14 instruments. These include not only Alligator Bill Williams (Video overview of the indicator) with the function of displaying fractals, but also a special indicator showing fractal channel.

It works on the same principle. The only difference is that the price extremums are connected with a line. In this article we will consider a strategy based on two indicators - Fractals and Stochastic. It's a great combination of two complementary tools.

## Review of indicators

Fractal is a mathematical term meaning a set with a self-reproducing function. Thus, this figure retains its shape regardless of its scaling. In the context of trading the term was first used by Bill Williams. He believed that the market is unpredictable and chaotic, so the classical methods of technical analysis do not allow for outstanding results. That is why he developed a new approach to market forecasting. He has also created more than a dozen popular indicators. Including the Alligator and Wonderful Oscillatorwhich are presented on the Intrade.Bar platform (site).

Actually, in the world of trading, a fractal is called a local extreme - the price maximum or minimum for a period of 5 candles. In fact, it is the formation of a certain combination of price formations on the chart. In this article, we will not go further into theoretical issues and will move straight to practice. A fractal indicator consists of a price channel in the form of two broken curves. The key a signal to trade is the moment when the price leaves its bounds - at the bottom or on top of the formed price corridor.

Stochastic is a basic oscillatorwhich we have already used many times in the strategies on our website. It looks very similar to the RSIThe indicator has two curves, but differs in the presence of two lines. Therefore, the main signal of the indicator is not the crossing of the boundaries of oversold and overbought zones, but the crossing of the fast and slow line. In the strategy we are considering, we should focus on the intersection of curves that occurred in the reversal zone (below the 20 or above 80 level).

The tools integrated into the platform are suitable for this strategy, so you can trade on the minimum intervals using turbo contracts for 1 minute. The choice of chart period is a question of trader's personal preferences, but we recommend to trade on the timeframe of 15 seconds.

Setting up a web terminal - step by step:

• Selecting a trading asset, such as CRYPTO IDX or EUR/USD - the one with the highest percentage of profit;
• Chart setup - candlestick mode with the interval of formation of elements in 15 seconds;
• adding indicators: "Fractal Indicator" and "Stochastic", both with standard settings;
• indication of the amount of investment in the transaction - not more than 5% of the balance;
• setting the minimum expiry time available (in the terminal it is activated by default).

If the traded asset has high volatility, Stochastic levels should be left at the standard value (20/80). However, in conditions of low activity the oscillator curves may very rarely enter these zones. In this case, it is possible to expand the overbought area to 70, and oversold area to 30. This will significantly increase the number of signals without compromising their accuracy. However, on CRYPTO IDX with stable volatility, you should always leave the default value.

We have already emphasized that the key point is the point at which the price leaves the fractal channel. When the candlesticks break through the boundary and then enter the corridor again, it is the best moment to enter the market. In this case, the presence of a signal confirmation on the part of the Stochastic is necessary.

• A signal to go up - the price exit beyond the lower limit of the fractal channel and the subsequent return to its limits. The red Stochastic curve must be broken by the white line from the bottom position.
• Down signal - completely identical situation, but with a correction to the reversal of the upward trend. The price should go beyond the upper border of the channel, and the red Stochastic curve will be broken by the white one from the upper position.

When trading up, the crossing point of the Stochastic curves should be below the 20 level, when trading down - above 80. There is also a subtle nuance here. On the eve of entering the oversold or overbought zone and forming a signal, the oscillators should return from the opposite area. Or at least reach the middle of the channel. If there is a repeated entry of the line into these areas in a short period of time, it indicates low volatility. Accordingly, it is impossible to enter the market.

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