How To Day Trade Using Fractals – Market Turns, Breakouts and Draw Trend Lines Using Fractals.


hello traders it’s samurai trader here
welcome to this training session over the last week or so I’ve bought upped
trading using fractals three or four times and I’ve had at last count 19
emails from members and from the general public wanting me to explain fractals in
more detail and exactly how you can use them in your trading and why I have them
on my charts and also why I’m such a great fan of them so the purpose of this
video is to really give you a good overview of how you can incorporate
fractals in your trading and I believe dramatically improve your bottom line as
a day or swing trader now as we get underway we are going to be looking at
some live charts in a moment so please go to full screen if you haven’t already
done so and some of the setups and ideas and strategies that I discuss they’re
all comprehensively I explained in my day traders fast-track program but first
of all if you haven’t subscribed to my channel please do if you don’t have my
ebook please go to my website at the bottom there I’m a day trader calm and
I’ll send you out so my ebook and other information about our our course etc for
$197 you receive world’s best day trading strategies this is the last
program traders you’ll ever need to investing anyway I don’t want to make
this a big advertisement I want to really get into today’s subject so
understanding the risk by law I’m required to put this up if you haven’t
already read this on one of my other videos please do and let’s now get into
it exactly what is a fractal there are now society set up university clubs that
study fractals it’s just an incredible world and way beyond me a lot of it now
when it comes to trading the I believe the greatest person that’s really broken
fractal trading down is Bill Williams and he’s written the two excellent books
new trading dimensions and also trading chaos and I’m going to be showing you
some of his work because I use it in my noting I may have adapted it I don’t use
his alligator lines which which I’ll show you but I do use some important
factors which bill openly has out there in the public it’s in his book it’s on
the internet using its books I should say but it’s very very important that
you understand fractals and how you can use them in your trading so let’s have a
look a common fractal has a minimum of five candles or bars and if you like
what this is done here it’s formed a little swing high in reverse it can form
a swing low and as I mentioned earlier we will go and have a look at them on a
live chart in a moment you can also have unorthodox fractals they not necessarily
nice and smooth like this but they can have jagged candles bars different size
and you’ll actually even see them at times you’ll see five all basically
forming a top so there are different types of fractals however what a fractal
fractal is really doing is giving you a pivot point to trade from to use for
your trend lines to use as a trading opportunity as you’re about to see now
you’ll also see that we have it coded that is a little black dot will appear
in some platforms as a triangle etc above the candles when you have a
fractal form some of the benefits of fractals well they clearly identify
pivot highs and lows which is really important for trading they can also help
you identify clear trendline points now if you’ve heard of Tom Demark one of the
greatest technicians when it comes to trading in the world today he’s written
an excellent book called the new science of technical analysis has written some
years ago now and he talks about his trendline drawing which he become quite
famous for when you look at it what he’s really doing is drawing his trend lines
all based on the fractal points and I’ll show you how to do that it just
makes drawing trendlines it removes a lot of the personal discretion and makes
it very rural space which makes it a lot easier fractals clearly identify
potential trading opportunities I’m going to show you just for the last
couple of days some brilliant trading opportunities and how you can identify
entry and exit points now fractals also identify potential consolidation breaks
when you go into chop and Bill Williams he talks about it basically when the
Gator is asleep and he basically calls the moving averages that he works with
or includes with these fractals as I’ll show you in a moment and basically when
the market is trending the moving averages are spreading apart they’re
what I call a fanning apart and he calls it he basically says that the Gator is
hungry the alligators hungry its mouth is open and when the trend is coming to
an end they start to close and the Gator goes to sleep and of course that’s when
you get consolidation and chop in a market now if we’ll see these on the
chart in a moment but just for your own knowledge if you choose to set up the
points or the moving averages exactly the same as Bill Williams has got them
there are the formulas so you’ll see that he’s displaced his moving averages
now most charting packages will allow you to do this many charting packages
even have these included as one of their standard indicators so if you are
interested you can it be readily available now a key point is that and I
want to just bring this up in case you want to review this later is that to
have a buy you’ll see in a moment that a fractal hit has got to be above the red
teeth which I’ll show you in a moment and you place a buy order one tick above
the high of a fractal so in other words you’re waiting for the higher to be
taken out and I’ll show you that and the opposite is true for a cell so once
again getting back to using fractals it’s a
very very rural spaced methodology now enduring trend lines and I’ll show you
this on the charts once again here you’ve got fractal points and basically
to draw a trendline you’ve got to be drawing them against these fractal
points there are exceptions where sometimes you’ll have such a straight
trend or it might be an uptrend or downtrend or retracement I should say or
a pullback and the pattern doesn’t form but at the swing low to have it safest
pattern here so if is pulled right back okay and you may not get another fractal
point but you can still draw a trendline up here waiting for the break and of
course there are things you’ll do to confirm the break etc but you have at
least one fractal point and we’ll look at that on the chart now also if you
look at various patterns for example I have patterns that I use which confirm a
top or a bottom and each one of these in the end our reliance upon a fractal
point forming so if you look at these four basically confirming a top or
confirming a bottom all of these are fractal points once again it makes your
trading very rules based so let’s there go and have a look at the charts so what
I’m going to do is show you my chart and how I would use it but we’ll also have a
look at how bill would have his setup on the chart now what I’m not going to
include his indicators he’s got what he calls the AO he’s got two what he’s got
about what’s the other one called you just slips my mind at the moment he’s
got a number of other oscillators that he uses on the bottom of this chart
which we won’t worry about putting those up so what we’ll do let’s look at my
chart here so this is some trading I did last night so I went going to my trades
over here it was three nice winners for 2100 but what I do want to do is to show
the fractal points in the potential trading opportunities so if we start
from left and go to the right this red line you can see here is what he calls
the teeth and actually what I should do is pull it down now I’m going to show
you which I’ll show you his chart and then we’ll go back to mine life easier
so what I’ve got on the chart here is the three moving averages that bill
recommends use so all of these have been offset as per the formula that I showed
you earlier in the presentation you can then see the little black dots are the
fractal points now what you’re looking at doing here is frige acting to the
right so here you’d be going across and you’re putting a by ordering and every
time I should say here a new fractal is formed the most recent fractal becomes
the actual information point so if we looked at this one here that was
discounted when this fractal point was formed to
lower here to lower it plots automatically I then put a buy order one
tick above there and I’m automatically stopped into the market now we go to the
next fractal point we can see here now one of the rules are to go short you
want to have all you your price action your sale sell has got to be under the
teeth remember he calls the redline his teeth the bottom one is the jaw and the
top one is a lip and see down here the alligator’s mouth is closed it then
opens up its mouth you can see it’s spreading apart this is a metaphor users
and it’s starting to close its mouth up here it becomes less hungry here it’s
closed its mouth it’s no longer hungry and until it starts to open up over here
so just to explain some other setups here on this chart you actually had
there a buy order put in now there are also certain rules and things that we do
it in the day traders fast track program which would discount that immediately
but if we look it down here for my normal traders you’ll see their traders
we’ve got very clearly a t2 setup we can see that there
there’s your entry and we would have entered down here we normally would not
have been involved in this trade here up here we’ve got some divergence you
really can’t see but you actually got divergence and then you’ve got a short
be getting back to stay focused here back on the fractal points here here is
a factor point the buy point is above the teeth so we’ve got an entry signal
to go long the market right here now this is where and you’ll see it on my
chart in a moment by the way what we’re looking at here this is the 1000 shares
are on the ears these are just as applicable on futures forex stocks it
really doesn’t matter you’ve got to remember trade is that all price action
is driven by two things fear and greed and as long as a market has fear and
greed the patterns the same patterns will appear in every market it’s a chaos
theory very similar to some little fact fractals fractals appear in every market
now we then looking now to go short we can see with it we’ve got a little swing
low here you project it to the right and you have then a sell order one SiC below
and we are now short in the market this particular fractal point out to the
right nothing there I think there and I think there so let’s now move along a
little bit then let me just scroll this a fraction okay and you can see here the
alligator’s mouth is wide open and here it starts to close so you’ve got nothing
there and I think there but you do have re-entry points now here as you get to
know the patterns you’ve got a re-entry here and for my traders you know this is
a t25 we’ve got another entry point right there and you’d be in short to the
market now you may be thinking where do you put your stops we’ll ideally on
the ES and NQ and basically any market I always recommend to ticks above your
closest swing high so you’ll stop would be two ticks above there or if you had
it entered here above there above there and above there and traders please
remember to make sure that you’ll stop because at times you’re getting at a
very good price your stop is not too small
many markets like the NQ you need to give it room to move so we can see here
what about over here so if we have a look here haven’t we got a potential
entry because we’re hitting it outside the teeth potentially yes but another
thing to consider is the angle and direction of your moving averages you
always want to be trading in the direction of your overall moving
averages now when you start to see them come together like you can see down here
all of a sudden the rules start to change so let’s scroll along here a
little and this is where consolidation comes in so you can see here at then it
reopened so what do we do in this point well technically you do actually have an
entry point right there and you’ll stop where would it be two ticks below you’ll
swing low now if you stop is too large one of my philosophies is is to always
have a maximum stop all the other considerations to say okay the stop is
too big maybe I’ll wait for the next trade entry rather than having my stop
down here because we still know we’ve been in a very strong downtrend
so where is my next entry point there are two ways that you can enter these
you can either wait for the candle to close which is my preferred methodology
is rather than to have a buy stop put here and you get stopped into this and
it comes down you’ll see this happen at times particularly after you’ve had a
strong trend you can wait for it to close or if you want to have a smaller
stop because when you wait for a candle close quite often the stop required is
going to be larger now for many of my members you know here what have we got
here we’ve got t20 so we’ve got a t20 here is you could classify that almost
as a t21 if you wish or here so a next entry point as a fractal point
would be here now this is what I call an uncommon fractal that is we’ve got on
either side but you’ve got this level here and that of course for my members
we know that as a t25 and a very nice one so let’s now go and have a look at
my actual trading charts and I’ll show you some opportunities there so first of
all rather than be running bills moving averages which is the teeth line here
which is the real essential one and what bill points out there it is there and
you can see my chart is that busy there’s so many things on there so what
I do have the eight to 21:34 v89 and I’ve got the teeth on there so the dart
21 works in my opinion as a great replacement for Bill’s teeth that sounds
a bit strange doesn’t it so let’s just remove the red line shall we okay so
we’ll there we go so let’s now have a look at some of their trade
opportunities that we have or had here so if we go across here we had a buy
order in here you could have I should say ID actually didn’t but by the way
traders down here we had a really nice pivot bounce okay you then got another
trading opportunity right there and you’ve got one here now notice these
fractals down the bottom here yes it’s under the 21 but there’s nothing to
connect with this is under nothing to connect with so here you’ve had an entry
so what you’re really doing here is is taking the highs out now this one has
been discounted by this one remember you’re always trading the closest
fractal to price action so Winer Winer winer this is if you have taken the
fractals we had one is they’re using our day traders faster
program setups and we were in on most of those earlier anyway but you can trade
fractals as a pure standalone strategy I mentioned on a video yesterday back in I
think it was 2007 to 2009 we did a huge amount of work on designing automated
systems for forex trading for the currency markets extremely successful
using purely fractal points now up the top here what about this fractal what we
can see is our entry point is right on the twenty one remember we’re going to
have a sell order in one tick below which would be there so you’re okay
where is my next one my next point is across there my apologies you actually
had one there where you stop going to go two ticks above there where’s my stop
going to go here ideally two ticks you’ve got a little swing high there
remember your fractal points forming your little pivot points
your little swing highs so perhaps you can see how many ways you can use
fractals and of course these plot automatically so you actually were in
here my apologies but you had if you had it aside on to take that you had another
entry here now you actually have an entry here there’s another couple of
reasons why you ideally you want to see your candle close in the direction but
also the further you move away from your moving averages the more likely you are
to have a retracement now for my normal members of course we’ve got there’s our
t20 is our t21 that I entered in on over here I had 34b by the way used
limit orders on all of these traders and I got filled nicely you know on an order
that I had earlier in the day was it earlier on that day I didn’t get filled
on all those is it there no I might have been the day before okay so yesterday
and even small we had a great I had a great trading day so at that little one
earlier then I went a little later in the day did some more
trading so it was really nice four out of four once again trading all of our
mechanical rules these are all totally mechanical why answered these now you
may be wondering just very quickly why I got in here I missed that one I forget
what I was doing and so I put a limit order in above the market which lowers
my risk digressing so here these delivered all really nicely let’s now go
and have a look at what would have happened where we are now live with
fractal trading and we’re 1:25 p.m. on Friday afternoon and it’s a globeX
market so what we’re looking at here once again is today’s price action the
New York closed of course and one hour later the Globex market opens and I
always wait for the market to settle down because you usually get some short
moves before it really settles down but let’s look at this here so the first
tradable fractal was there one sec that would have failed and you can see their
little fractals obviously you’ve got four flat level candles here so there
was a fractal point so if you have taken that one you would have been stopped you
then have a fractal head here and yet a little double bottom so you may or may
not have taken that particular one in actual fact now remember we’re very very
cautious here one of the rules you want to look at there is we’ve got
effectively if I can use Bill’s metaphor the alligator the ema are all coming
together this is a real danger zone so our next trading opportunity is here
because what Bill is looking at and what he talks about is really is setting a
buy order a sell order above the mouth so that when it does open its mouth okay
it’s ready two weeks which is effectively you had a buy order here one
tick above there and a way you win your next buy point is there one tick yes I
know we’ve got a pivot but let’s put that aside for a moment and you’re in
the market again if you decided to wait for a pivot break
here it is here so you’ve gone up come down you hit the pivot and you have
taken off again now for our members we know why down
here we’ve got t2s everywhere so you got t2 is you’ve got a t10 you’ve got
bouncers you’ve got all sorts of things happening the next point is up here
before the market turns and of course our members know what have we got here
we’ve got an extended market and we also have something that we call angulation
so we can see that wedge formation that we’ve got there that’s an area to be
very very cautious of when you’ve got that because it’s going to come back to
the mean let’s scroll along a little further and we’ve got our beautiful
classic double top right there and right there of course we’ve got our t20 you
had at C 20 down there of course you’ve got a nice t20 here we come down and
what have we got there whoops let me just remove these lines just get rid of
that sorry traders and we’ve got a fractal hit over here
now notice these fractal points here no man’s land no man’s land fractal it hits
the land you’ve got a sell order 1 tick below there and it delivered where is my
next fractal buy point well number one is it above the 21 yes it is that is the
buy points above 21 which shows that the market is turning in a way it goes now
for members with the 8 it’s too sensitive if you use the 8 I recommend
you stick with the 21 which normally we wouldn’t have on our charts but if you
choose to use fractal trading you can you know it’s it’s just an option now by
the way with this being said by the way try to say I’ve got to say that all of
our day traders fast track program setups who would have been in on all of
these anyway there you would have been in you had an opportunity here you’ve
got one there got one there so in a lot of these you would have been in maybe
earlier you would have been short up here anywhere in your nice little double
top at c7 and just for those for my members there you’ve got a t7 there as
well what else we got we’ve got an 89B so you’ve got a whole range of trading
opportunities what have you got there look at your long term you’ve got your
t10 right there up here then you’ve got your frontal head now here what about
this fractal notice here you’ve got no price action closing below the 21 until
you go over here and where price action is still forming
if you’re waiting for your quote for your candle to close your heaven still
closed below so in summary traders fractal trading
can be a standalone trading opportunity by waiting for a swing high or swing low
to be taken out sometimes you will not sometimes many of
the times you are getting in one to five ticks too late so there are strategies
that will get you in earlier but one thing I didn’t show you I just
remembered was the trend lines so what I want to show you traders was this let me
just go back to the 1000 what have we got there let’s pull this up now in
drawing trend lines using fractal points okay you’re going to project like that
you can see here you’ve got a fractal point a fractal point then you got all
of this and there’s no fractals in cases like that I will bring it up and I’ll
wait for the break of the eight so here I have a clear trend line break up here
but look at this here now by the way the mechanical traders and the automation
that we worked on some years ago was this trade was it was totally discounted
because of a distance between price action and entry and there was no
fractal up here but if you look at this here okay so you’re adjusting your
fractal and look at that there there is a very clean clear trend line break look
at this one here now remember I’ve just scrolled to a random area in today’s
price action traders and there is a clean break so remember to go long you
need a falling trendline to go short you need a rising trend line now this is a
point that I mentioned earlier the same as this one where you may have to be
arbitrary that is you take that there and you may be willing to say okay I’m
going to take this trend line because I’ve had no other points no the trend
lines I’ve got a clear cut close above my 8 my entry point is here so perhaps
you can just see the opportunity in learning how to draw trend lines using
fractals these little pivot highs and pivot lows it just means that you can
make your trading very rules based and mechanical in its nature so trade is
that’s it to this session for my members so I’m about to go and record a couple
more videos particularly on the t20 and the t21 and also trading patterns but
anyway we’ll see you on the next video thank you

18 thoughts on “How To Day Trade Using Fractals – Market Turns, Breakouts and Draw Trend Lines Using Fractals.

  1. Great explanation on your use of fractals. I'm a new subscriber to your channel, which time frame do you use this strategy on? Thank you in advance..

  2. wow i was searching for good fractals methods, you explain so good. I am familiar with Bills work and I trade forex, but that instrument on that chart moves soo smooth. I will check out your course and your work!

  3. "Get the Competitive Edge Now!
    https://www.iamadaytrader.com/2018-check-out-the-day-traders-fast-track-program"

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