Another strategy built on the Fractals indicator, but designed for a larger timeframe. As a filter, the ZigZag indicator is used, which analyzes extremes and selects the most significant ones.
The ZigZag indicator belongs to the basic tools. Unlike many other indicators, it does not predict price behavior but reflects its behavior in the past. The overlay of indicator lines allows you to filter out noise and corrections, showing the trader real significant trends. He finds the main highs and lows and connects them directly with linear segments.
- Beginner Strategy Advantage: This strategy teaches you how to open up against the crowd. It is believed that the beginning of a trend can be set by market makers. Further, supporters of trend trading flow into the market, further accelerating the price. At this point, market makers begin to close deals at their peak. These local bounces must be caught in accordance with this strategy.
Recommended currency pair – EUR / USD, GBP / USD , timeframe – M30. The fractal indicator has all the settings “sewn” into the code, the ZigZag has only one setting – ExtDepht = 12 (the minimum number of candles between highs and lows). Download the strategy and indicator template.
Conditions for opening a long position:
- The fractal indicator drew a fractal down. One is enough, it is not necessary to wait for the appearance of the zone (as in the previous strategy).
- The presence of the bottom is also confirmed by ZigZag.
At the level of the confirmed candle (according to the level of shadow) we place a pending Buy Limit order. The target profit level is 10 points; at the same level, we put a stop in the opposite direction.
ZigZag indicates maximums in blue, minimums in red. The screen shows the formation of a down fractal (red arrow), which coincided with the redpoint of the ZigZag. We place orders (their levels are indicated on the screen from top to bottom in the following order: Take Profit, Buy Limit, Stop Loss. After placing orders, the price went up and hooked the order only a few candles later. The opening point of the transaction on the order is indicated by a blue arrow. On the same candle, there was an automatic closing of the position by taking profit, while the stop was not hooked.
Conditions for opening a short position:
- The fractal indicator drew a fractal up.
- The presence of a peak is also confirmed by ZigZag.
The principle of placing orders is similar, with the only difference being that you need to set a pending Sell Limit order. On the candle, indicated by the red arrow, we see that all conditions are met: the simultaneous appearance of the ZigZag point and the up arrow of the fractal indicator. On the candle, indicated by the blue arrow, Sell Limit will work and on the same candle, the deal will close automatically.
This strategy is non-standard in that it proposes the opposite principle of action. The fractal theory implies breakdown trading. Here, a combination of two similar indicators allows you to find points on the rebound, that is, “against the majority”. And market makers also trade against the majority, and this strategy provides for the repetition of their actions with small profit goals. The strategy is relatively universal, but for each pair, you need to choose the length of the stop and take profit.