Are you or your friends looking for a good price action strategy? We have good news for you! A fractal breakout strategy is a great option.
Price Action Trading Strategy
However, let’s first learn more about price action trading strategy.
It is important to note that price action describes the characteristics of a security’s price movements. To summarize, price action is a trading technique. In particular, it allows a trader to read the market and make subjective trading decisions based on actual and recent price movements, rather than relying on technical indicators alone.
As price action does not take fundamental analysis factors into account and focuses more on recent and past price movements, the price action trading strategy relies on technical analysis tools.
Do you know who uses the aforementioned strategy?
As it is an approach to price predictions and speculation, this strategy is used by speculators, retail traders and arbitrageurs. The interesting thing is that it is also used by trading companies that employ traders.
It is possible to use price action trading on various securities, including stocks, currencies, bonds, commodities, derivatives, etc. We should also note that it is more suitable for short and medium term limited profit trades rather than long term investments.
The vast majority of traders believe that the market follows a random pattern and that there is no clear systematic way to define a strategy that works every time. However, price action trading is quite popular in the trading community.
Now, back to the fractal breakout strategy.
First of all, we must explain what a fractal is.
Fractals refer to recurring patterns that occur in the midst of a large and highly chaotic price movement. It is important to note that fractals consist of a number of bars, more precisely, 5 or more bars.
How are fractals used in trading?
Hopefully, the vast majority of trading charting platforms offer the option of using fractals as a trading indicator. As a result, traders do not have to worry about the technical aspects. All traders need to do is use fractal as the indicator for the chart.
Fractal breakout strategy and its importance
Let’s learn more about the fractal breakout strategy.
The strategy mentioned above is to determine the price of the last top of the fractal and then enter a trade once the price breaks above the last top of the fractal.
The fractal breakout strategy works best on weekly or monthly time frames. Also, the fractal breakout strategy can work daily and on other time frames.
As in the case of all trading strategies, you should pay attention to risk factors. You should be careful with the fractal breakout strategy.
It is important to note that the past performance of the aforementioned strategy does not indicate that the aforementioned strategy will achieve the same results on a regular basis. Therefore, you need to consider several factors before making a final decision.
