Trading strategy on a fractal reversal with the RSI filter

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Trading strategy on a fractal reversal with the RSI filter

Bill Williams is one of the most famous traders in the world, and he was in fact a pioneer in the field of modern trading. He founded the world’s first school to specifically teach trading on the market. To ordinary traders, he is better known as the developer of a number of popular indicators. The most popular ones are the “Alligator” and “Fractals.” In this article, we will review an effective trading strategy based on fractals and the RSI (Relative Strength Index).

Briefly about indicators

Bill Williams’ fractals have little to do with fractal mathematical theory. They are in essence local highs and lows (extremes). They are formed through automatic candle analysis. The algorithm recognizes characteristic candle combinations.

The RSI is one of the most popular indicators of the oscillator class. It consists of one line, the value of which is calculated by a sufficiently complex formula for averaging the price values for a certain past period on the chart. In this strategy, the Relative Strength Index acts as a filter. A fairly large number of fractals appear regularly on the chart, but the oscillator will help us to select the really effective signals.

Configuring the trading terminal

The strategy is not tied to specific assets, so you can choose any currency pair, except for pairs with BTC and LTC, because they have a very low profit percentage and a chart that is not suitable for technical analysis.

How to set up the platform:

The relative strength index should be configured so that its period is equal to 8, and the OverBought/OverSold zones are at the 50 mark. In order to improve the visual perception, it is recommended to color the overbought area green, and to make the oversold one red. An example of a properly configured RSI indicator is shown in the picture below.

Signal for options “Up”

Trading on an increase can occur when two requirements are met. First, there must be a descending fractal in the form of a downwardly directed triangle. It is located under a Japanese candle. Secondly, the oscillator must cross level 50 and enter the overbought zone.

Signal for options “Down”

There is nothing else that needs to be described here. The signal is similar to the first but in the reverse – an upward fractal and a transition of the RSI to the oversold area are of interest. For clarity, this moment is shown in the picture below. At the same time, entry on the market was made 3 candles after the formation of the extremum, because the confirmation from the filter was not received immediately.

An example of trading on a fractal reversal

The real effectiveness of strategies is always tested in practice, which we have done. Specifically for this article we opened a trade on the Binomo trading platform. As our asset, we used the crypto index, because excellent price formations without omissions or delays are formed on the 30-second chart. The rates of other assets are not updated often.

A strong trend was not observed; however, in order to profit from trading options contracts, a minimum deviation in the forecasted direction is allowable. So we got our $8 net profit on a $10 investment. There was a signal on the market for the purchase of an option “Down,” when the RSI again returned to the oversold zone, and above the candle there was an upward fractal.

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

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The Best Forex High/Low Fractals Trading with RSI Trend Momentum Filter

Trading fractals Bill Williams system really works – Forex High/Low Fractals with RSI Trend Momentum Trading System.

This is a high profits Trading System using fractals profitably. The concept of The Forex Fractal is more than just a strategy idea. The fractal defines an area being watched by large numbers of Big Dog forex traders.

Fractals are indicators on candlestick charts that identify reversal points in the market.

Traders often use fractals to get an idea about the direction in which the price will develop. A fractal will form when a particular price pattern happens on a chart.

The pattern itself comprises five candles and the pattern indicates where the price has struggled to go higher, in which case an up fractal appears or lower, in which case a down fractal appears.

The chart below shows what fractal indicators look like on a chart:

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  • Use a demo account or a small live account first to practice this trading system

A “High Fractal” formed when a candle has two candles to the right of it with two lower highs and at least two candles to the left of it with two further lower highs.

A “Low Fractal” is formed when a candle has two candles to the right with higher lows and two candles to left with two further higher lows.

The following chart shows what this pattern looks like:

Fractal indicators can be used to determine the market direction. Traders can use fractal indicators to determine the possible direction of price in a market.

RSI 50 level can be used as a strong tool to confirm the different kinds of trade setups from any trading system.

Whether you use the candlestick patterns, support/resistance breakout, or any other trading system, you can consult the RSI 50 level to confirm your trade setups.

Let me show you the examples of High/Low Fractals with RSI Trend Momentum.

  • RSI line upward above 50 level
  • NonLag MA 21 upward and blue color
  • LOW FRACTAL
  • Mint Signal Green color
  • RSI line downward below 50 level
  • NonLag MA 21 downward and red color
  • HIGH FRACTAL
  • Mint Signal Red color

Reversal Fractals Strategy: A Trader’s Guide to Using Fractals Effectively [9116]

High accuracy “Reversal Fractals System and Strategy” – This is a very simple yet profitable strategy. Fractals are simple five-bar reversal patterns. This article will explain fractals and how you might apply them to your trading strategy.

  • Time Frame: H1 or higher
  • Currency Pairs: Any
  • Reversal Fractals
  • The profit Goldeneye
  • Moving Average
  • DashBoard
  • Auto Pivots
  • Signal Line
  • Probability Meter
  • REND (RSI Filter)
  • Stochastic Oscillator
  • MACD Bars

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.

Fractals are lagging indicators.

A fractal can’t be drawn until we are two days into the reversal.

However, most significant reversals will continue for more bars, benefiting the trader. Once the pattern occurs, the price is expected to rise following a bullish fractal or fall following a bearish fractal.

Most charting platforms now provide fractals as a trading indicator.

This means traders don’t need to hunt for the pattern. Apply the indicator to the chart, and the software will highlight all the patterns. Upon doing this, traders will notice an immediate problem: this pattern occurs frequently.

Fractals are best used in conjunction with other indicators or forms of analysis. A common confirmation indicator used with fractals is the RSI and MACD.

  • Download “ForexWOT.Com-ReversalFractals” (Zip/RAR File).
  • Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
  • Copy the “ForexWOT.Com-ReversalFractals.tpl” file (template) to your Metatrader Directory …/templates /
  • Start or restart your Metatrader Client.
  • Select Chart and Timeframe where you want to test your forex system.
  • Right-click on your trading chart and hover on “Template”.
  • Move right to select “ForexWOT.Com-ReversalFractals” trading system and strategy
  • You will see “Reversal Fractals Trading System” is available on your Chart
  • Reversal Fractals: Green “UP” arrow below the previous swing low
  • TREND (RSI Filter): Green histogram
  • Stochastic Oscillator: Bullish (aqua line > yellow line)
  • MACD Bars: Green
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