Fractal Channel Trading Strategies To Utilize On Binomo
The assortment of integrated indicators on Binomo’s platform is provided in the form of 14 tools. These ranks not only include Bill Williams’s Alligator with an option to show fractals but a special indicator as well that illustrates the fractal channel.
It works on the same basic principle. The difference is that the price peaks are connected together by a line. This article will investigate a strategy designed for Binomo based on two main indicators, fractal and stochastic. These two indicators complement one another spectacularly.
Fractal – is a mathematical term that means things with the ability to reproduce themselves. Therefore the figures retain their form regardless of scale. Bill Williams was the first to introduce it in a trading context. He thought that the market is unforecastable and chaotic, meaning that classic methods of technical analysis wouldn’t be capable of achieving the desired results. To resolve this issue, he developed a new approach to forecasting the market. Thus creating more than a dozen popular indicators. Including the Alligator and the Awesome Oscillator, both available from Binomo’s platform.
In reality, fractal is viewed as a local extreme in the trading world, either the price minimum or maximum in a period of 5 candles. In essence, it forms a specific combination of price formations on the chart. This article won’t go into any further detail in terms of theory, our aim is to further clarify how it works in practice. The fractal indicator on Binomo consists of a price channel made up of two broken curved lines. The key signal for trading is the moment the price breaches its borders, either through the upper or lower limits of the price channel.
Stochastic – is a basic oscillator that we often use in strategies on our site. At first glance it is similar in approach to the RSI, however, the Stochastic has two curved lines. Therefore, its primary signal isn’t when it breaches into the overbought and oversold zones, but when the fast and slow lines intersect. In considering the strategy, it is worth oriented yourself with the intersection of curves that occur in the reversal zone (below the level of 20 or higher than 80).
Trading terminal set-up
A platform that provides integrated tools works best for this strategy, so you can trade in minimal intervals with turbo-contracts of 1-minute durations. Choosing the period of your chart it can be a question of personal preference, however, we recommend trading in a 15-second timeframe.
The step-by-step set-up for your online terminal:
- choose your trading asset, for example, the CRYPTO IDX or the EUR/USD, those that have a higher profit margin;
- chart set-up, a candle regime with a 15-second interval;
- add the indicators: «Fractal indicator» and «Stochastic», both with the standard set-up;
- the total sum invested per trade shouldn’t exceed 5% of your total account balance;
- use the minimal expiration period available (it will be active by default on the terminal).
If the asset you are trading with is highly volatile, the Stochastic level should be set as the standard (20/80). That being said, if there are low levels of activity, the curves of the oscillator may rarely enter into these zones. In that case, you can expand the overbought level to 70, and the oversold level to 30. This allows you to increase the number of signals without sacrificing their accuracy.
However, the CRYPTO IDX displays stable volatility, so always set these by default.
Strategy trading signals
We’ve previously mentioned that the key point is when the point when prices break through the fractal channel. When the candles break through the border then return into the corridor, this is the best point to enter the market. At the same time, it is important that this is confirmed by a Stochastic signal.
- The signal for growth – when the price breaks through the lower border of the fractal channel and returns into the corridor. The red Stochastic curve should break through the white line from below.
- The signal for decline – is the exact same situation as stated above but the reverse. The price should break through the upper border of the channel, and the red Stochastic curve should break through the white from above.
When buying, the point of intersection of Stochastic curves should be lower than the level of 20, and when selling, higher than 80. There is also another slight nuance here. Right before entering into the overbought or oversold zone and forming the signal, the lines of the oscillators should return from the other side. Or at the very least reach the center of the channel. If the line often touches these areas within short spans of time, that means that there is low volatility. Meaning that you shouldn’t enter the market in such circumstances.