ABC of Breakout Trading with Fractal Pattern
Here we introduce ABC of Breakout Trading with Fractal Pattern. Fractal Pattern is the ultimate tool to predict Fractal Wave in the financial market. We are not talking about the Fractal indicator by Bill Williams. Fractal indicator does not adapt the fractal wave since the indicator is not alternating peak and trough in turn. However, we are talking about more like Elliott Wave pattern, which encompasses small waves inside bigger wave.
We call this big fractal wave made up from several mini waves as the Mother Wave. We call the mini waves inside the mother wave as child waves. In Fractal Pattern Scanner, detecting of highly probable breakout pattern is an automatic process. Hence, you will notified when the potential breakout pattern is detected. When the breakout pattern is detected, we need to understand what is the A, B, C to trade with breakout. A, B and C are all expressed as the number of bars for easy application in practice. We count the bars from the latest bar to backwards. For example, 2 bar ago in H1 timeframe means that it references the bar in 2 hours ago. Here is the brief description of A, B and C for trading breakout in terms of their time reference.
A: Position of the origin (peak or trough) of the breakout: This is the important reference for breakout because this is the first fixed reference position before breakout happens.
B: the current position of breakout (peak or trough) after the profit was running for sometime.
C: Distance between origin of breakout and current position of breakout ( A-B =C)
Hence, with A, B and C, we have the following relationship of A – B = C. A, B, C helps you to recognize if the signal is how fresh or mature for your trading. For example, if the distance C is small, it means that it is fresh and young opportunity to trade. If the distance C is large, it means that the breakout signal was running for some profit already.
For working example in H1 timeframe, 52 – 2 = 50 indicates that the origin of Breakout was 52 bar ago (i.e 52 hours ago) and current position of breakout is 2 bar ago (i.e. 2 hour ago). Hence, the distance C is 50 bar (50 hours.).
Up to this point, someone might question back why not using the actual breakout at the breakout level as the time reference ? Yes, it could be valid thinking. However, counting the actual breakout at the breakout level is fuzzy. Sometime, price might just touch the level, pull back for sometime and revisit the breakout level, etc. Around this area, all sort of things can happen. However, peak and trough before breakout happens provides the fixed reference point for the breakout.
We hope that with this simple article, you can understand how peak and trough analysis is connected to Breakout Trading. Please check the screenshot to find out ABC of breakout trading. The screenshot combines two screenshots. First screenshot shows when the breakout was just detected in EURUSD H1 timeframe. Second screenshot shows the breakout ran for profit for sometime in the same chart. You will find this is almost easy as ABC with the screenshot.
Here is the landing page to our Fractal Pattern Scanner. With Fractal Pattern Scanner, all the breakout trading opportunity detection is automatic.