Today we will analyze a fairly simple Alligator and Fractals Trading Strategy and although it is rather difficult to call it new, since it is based on the indicators developed by Bill Williams and uses their basic principles, however, there are not large, but quite significant additions that are qualitatively improved the accuracy of entering the market.
Some statistics:
Due to these filters, signals are not so frequent, from 1 to 3 per week, but the percentage of successful transactions is quite good — 75%. For the eur/usd currency pair from May 1 to October 30, the strategy showed a positive result of +633 points with a drawdown of -47 points (all data in points in the strategy are given for 4 digits).
The essence of the strategy is to find an entry point at the moment of exit from the lateral consolidation.
- Currency pair — EUR / USD, GBP / USD, EUR / JPY, trading on other currency pairs is also possible, but testing for them was not conducted.
- Time interval — H1.
Indicators (already available in MT4 by default):
- Alligator indicator — standard settings.
- Fractals indicator
Conditions for entering the market for a BUY according to the rules of the «Alligator and Fractals» strategy:
1) To determine the entry point, you need to find the consolidation period. The Alligator indicator will help us with this. When its lines begin to intertwine with each other, this means that consolidation has begun on the market.
2) Inside this consolidation, we wait for the appearance of a fractal that satisfies the following conditions:
— the fractal candle should be above the Alligator indicator.
— the fractal candle should not have points of contact with the lines of the Alligator indicator.
3) At the maximum of the fractal itself (peak), we draw a horizontal line and when the price of this line touches, we open a buy order. You can use a breakout buy stop order.
4) Stop-loss is set under the last fractal directed down.
5) Take profit is 50-55 pips. You should also place a trade on a trailing stop of about 20 points.
Conditions for entering the SELL:
1) To determine the entry point, you need to find the consolidation period. The Alligator indicator will help us with this. When its lines begin to intertwine with each other, this means that consolidation has begun on the market.
2) Inside this consolidation, we wait for the appearance of a fractal that satisfies the following conditions:
— the fractal candle should be below the Alligator indicator.
— the fractal candle should not have points of contact with the lines of the Alligator indicator.
3) We draw a horizontal line at the minimum of the fractal itself (peak), and when the price touches this line, we open a sell order. You can use a sell stop breakout order.
4) Stop-loss is set above the last fractal, directed upwards.
5) Take profit is 50-55 pips. You should also place a trade on a trailing stop of about 20 points.
Additions to the forex strategy:
— if the price has not yet approached the drawn horizontal line, that is, we are not yet in the market, and a fractal appears on the chart in the same direction, but does not satisfy the conditions, then we cancel the deal and wait for the fractal to appear under all conditions.
— if the size of the stop order is more than 50 points, then it is better to skip such a deal, or consider the option of a reasonable decrease in the size of the stop order.
Video Forex Strategy «Alligator and Fractals»:
- Recommended to watch with English subtitles!
- Download mt4 template for strategy — alligator_fractals_tpl (archived)
- Indicators on the chart will appear by themselves, as they are already available in MT4
