How Fractals Work ?How Fractals-4 Works
There are several ways to create short-term volatility breakout systems. I have found that different types of systems based on range expansion test out quite similarly.
Fractals-4 trading the breakout mode is by using "channel breakouts" which is shown by 2 blue lines at your MT4 chart.
• If the price breaks and our volatility indicator say the market is on 'normal' mode , breakouts above or below the blue lines on your MT4 chart, then a trade is entered.
(NOTE: the breakout times need to be in the trading time zone specified at the EA parameters).
Pros and Cons of Trading a Breakout System:
Like most systems, volatility breakout systems will clean up in high volatile or runaway markets but tend to thrash when conditions get choppy or volume dries up.
We believe they are still among the most profitable type of system to trade, and we also feel they will continue to be profitable in the long run. It is "durable" and "robust", though it tends to deteriorate when too large of an order is placed.
Whipsaws are a drag but they are also inevitable when trading a breakout system. Many times Fractals-4 will buy the highs and sell the lows. It takes a great deal of "confidence in the numbers" to trade this type of system. Fractals-4 trading system has been testing with a minimum of 2 years.
The Low Volatility Breakout System intends to take as many small profits as possible, not allowing them to evaporate. Such an approach is the opposite of the "let your profits run" mindset, which attempts to optimize positive trading results by increasing the size of winning trades while letting others reverse. Low Volatility Breakout achieves
results by increasing the number of winners and sacrificing the size of the wins. It's not uncommon for a trader of a longer time frame to achieve positive results
by winning only half or even less of his or her trades - it's just that the wins are much bigger than the losses
Fractals-4 trade High Volatility Breakout Trading system at European trading hour and implement Low Volatility Breakout Trading supplementary style soon after European market closed.
On balance, a volatility breakout system can be traded on most all markets. However, a market might be very profitable one year and yet perform mediocre at best the next. A portfolio of 2 to 3 high volatility markets seems to work well. NEW Fractals-4 has been tested to work on EURUSD, GBPUSD and EURGBP markets. The problem with trying to trade too many markets at once is that it can become quite difficult to keep up with the activity level if your parameters are fairly sensitive.
RISK CONTROL:
Fractals-4 use a Controllable Risk - the amount of risk which can be predetermined and defined by a money management (the percentage of your account equity you are willing to risk in one trade) combine with initial stop, break even point stop and trailing stop.
