FTLS - Fractal Trendl Lines System

[kenykau]

I use the system in my live stocks and future account and sometimes the fx.
The system is inspired by Chuvashov's Fork. I found the Chuvashov's Fork has some draw backs and want to improve the system.
I still feel it has some rooms to improve. Therefore, I would like to invite your help and suggestion. Please forgive my poor writing! Just cut it short, let's go!

Review of Chuvashov's Fork
I borrow the image, which defines the Fork, from mql4.com:

the left is down trend, right is up trend

The Fork's idea is to use 3 Fractals to form 2 Lines, which indicate the trend reversal.
I, sometimes, found the price will against the system after the price breaks the trend line.

Furthermore, I observed that even the fork's indication is correct, but the fork is too wide. We just keep waiting the price to break the line.
I illustrated the problems as follow:

Fork's Problem.png

My Idea is try to add one more fractal and 2 more trend lines to identify the reverse more accurately and quickly.

1. 4 consecutive fractals: F1, F2, F3, F4
2. 3 consecutive trend lines + 1 other trend line: FTL12, FTL23, FTL34, FTL14
3. Fork's formation is applicable, except one situation.

I will illustrate point 1 and 2 in following pictures and go to explain point 3 in more details:

Formation.PNG

[kenykau]

Convention:
Connecting Fractal 1, F1, and Fractal 2, F2, to form a trend line, TL12, I will use this convention in my later text.

Recall Fork's idea:
1. In an UT (Up Trend), TL23 > TL12
Price Close Up Break TL23, Buy Triggered
2. In a DT (Down Trend), TL23 < TL12
Price Close Dn Break TL23, Sell Triggered

FTLS's idea: (General Case)
1. In an UT:
A. TL23 > TL12 and TL23 > TL34 --> TL23 = Max(TL23, TL12, TL23) [corrected on 12th Dec, 13]
B. When A formed, TL14 is a valid TL
C. Price Up Break TL14, Buy Triggered, Set Last Lower Fractal as SL

UT1.PNG

UT2.PNG

UT3.PNG

[kenykau]

When the new Lower Fractal is Form move the SL to the newest Fractal.

Exist is going to break the Sell Trigger or hit SL.

[kenykau]

This is illustrate the Exist of the UT and Enter the DT:

UT5.PNG

We can observe that we miss a large portion of profit if we exist using SL. But the Counter trend (DN Trend) trigger can save a bit of profit, can we improve it. Of course! Before this, I will go to talk more about the Sell Part.

[kenykau]

2. In the DN trend:
A. TL23 < TL12 And TL23 < TL34 --> TL23 = Min(TL12, TL23, TL34) [Corrected on 12th Dec, 13]
B. When A formed, TL14 is a valid TL
C. Price Down Break TL14, Sell Triggered, Set Last Higher Fractal as SL

DT1.PNG

[kenykau]

Again, the Up Trend is again coming

UTAGAIN.PNG

NOTE

You may discover that we need to improve a bit of the performance of Exist and Enter.

In the next of couple day, I will put the materials here.

Please do add you comment and idea to improve the system

[kenykau]

Let's review what is the dis-advantage of FTLS by following image:

UT5.PNG

To overcome the dis-advantage, we have two methods by
1. going into smaller time frame when the FTLS is form but the Close price doesn't break the TL14
2. By using TMA-RSI2

Method I: Smaller Time frame confirmation
At the very beginning, we have use the H1 as the setup, but we do find once the pattern confirmed, we need to wait and wait for the close price to break the TL14.
While we are waiting, we can apply the same rule in M30 and M15, we can see both time frame are confirming the uptrend will come soon. Illustrated as follow: (I have cleared some lines in H1 for better view)

MTF-Setup.PNG

In the M15 pattern, we can enter the Long position if the close price breaks the TL14. We can gain more pips.

What is more, when we look at the M5, the same pattern is formed to confirm the trend reverse.

MTF-SMALLER.PNG

Again, more pips we can put into the pocket!

Reminder: please look at the M5 image, you will find the trend line also acts like a resistance.!!!

[kenykau]

The second method is to use the RSI-TMA to enter the trade faster!!!

In H1:
1. Wait for valid Pattern
2. Put RSI-TMA
3. For BUY, when RSI-TMA up break 20, buy at next opening
4. For SELL, when RSI-TMA down break 80, sell at next opening

Illustration for Buy is as following image:

RSI-TMA.PNG

[kenykau]

In general, we connecting the upper fractals for the uptrend and lower fractals for down trend.
The Up trend pattern is Max(TL12, TL23, TL34) == TL23 at the time the pattern is formed.
The Dn trend pattern is Min(TL12, TL23, TL34) == TL23 at the time the pattern is formed.

After the pattern is form, we draw one extract trend line TL14 as a trade entry trigger (if you use the RSI-TMA, you don't need to draw the line).

Exceptional Case: Sometimes, we can reverse our pattern to make our move.

In UP TREND, we also connecting the Upper Fractal, but the rule changes to
Min(TL12, TL23, TL34) == TL23 at the time the pattern is formed.

In DN TREND, we also connecting the Lower Fractal, but the rule changes to
Max(TL12, TL23, TL34) == TL23 at the time the pattern is formed.

Other rules apply in entering position. Either you can use TL14 as buy trigger or RSI-TMA.

Here the illustration of the Exceptional Case of LONG (BUY) position:

Exceptional.PNG

[SteveHopwood]

I am posting a link to this in my weekly roundup at http://www.stevehopwoodforex.com/phpBB3 ... =10&t=2294

Let's hope it attracts some attention.