In the cryptocurrency world for ten years, professionally trading for six years, over 3100 days. I have done long-term, short-term, ultra-short, and swing trading; basically, I have tried all types of methods, so I have a say on this issue.
I have always said that mastering a skill takes the '10,000-hour rule.' If you practice 8 hours a day, with over 200 days of review in a year, it takes about 5 years just to stabilize profits. There will definitely be big pitfalls within 10 years, so to be safe, don't let your capital exceed your capability range for 10 years.
Many experts who have traded from tens of thousands to hundreds of millions or even billions of dollars simply use contracts with very large multiples; many have perished in a bear market, but you don't know it. Human nature, in the face of major trends, often causes people to lose the ability to make correct judgments.
In the cryptocurrency world, there are some obscure knowledge or small tricks that, while inconspicuous, are actually quite important. Today, let's talk about a few:
Cost dilution is really not that simple.
For example, if you invested $10,000 when the price was $10, and later the price dropped to $5, and you added another $10,000. At this point, your average cost is $6.67, not the $7.5 that many think. This situation is common in the market; understanding this cost calculation is quite helpful for managing positions.
The effect of compound interest is indeed quite frightening.
Suppose you have $100,000 and earn 1% every day. If you can stick to it for a year with 250 trading days, your assets could reach $1,323,200 by the end of the year. If you persist for two more years, your assets could exceed $10 million. Of course, this is based on stable returns, and the challenge lies in how to maintain this compound growth.
Probability, profit-taking, and stop-loss; there are nuances here.
Assuming you invest with a 60% likelihood of winning, earning 10% each time you exit, and losing 10% with a stop loss. By doing this 100 times, the total return can reach 300%. But the premise is that you must strictly adhere to your trading plan and not be swayed by market fluctuations, especially during significant market volatility; you must remain calm.
Greed is the biggest stumbling block.
For example, if you start with $10,000 and earn 10% each time, after 49 days, your assets could exceed $1 million, over $10 million in 73 days, and possibly over $100 million in 97 days. But in reality, very few people can achieve this because most cannot control their greed, ultimately leading to failure. This is also why many traders make money but cannot keep it.
Contract trading and position management.
In contract trading, position and capital management are crucial. Many people like to use 20%-30% of their capital to open positions, but I personally prefer to use only 2%-5% and then leverage it 20 times. This way, the risk is controllable, and one won't be flustered by large fluctuations.
Seven iron rules for trading in the cryptocurrency world!
1. If a strong coin falls for nine consecutive days, be sure to follow up in a timely manner.
2. If any cryptocurrency has risen for two consecutive days, be sure to reduce your position in a timely manner.
3. Any cryptocurrency that has risen more than 7% should still have a chance to rise the next day; you can continue to observe.
4. Strong bullish coins must wait until the pullback is over before entering.
5. If any cryptocurrency has three consecutive days of dull fluctuations, observe for three more days; if there is no change, consider switching coins.
6. If any cryptocurrency fails to recoup the previous day's cost price the next day, you should exit in a timely manner.
7. If there are three on the rise list, there will be five, and if there are five, there will be seven. For cryptocurrencies that have risen for two consecutive days, you should enter when the price is low; the fifth day is usually a good selling point.
If you are new to the market, come find me, follow my public account [YuanYuan Gathering Wealth], and I will teach you to learn and operate simultaneously; if you are already in it but not doing well, you can come to me, and I will help you, ensuring you won't make mistakes repeatedly; if your positions are trapped, I will provide reasonable untrapping solutions based on your entry points. Because everyone has different trapped points, the solutions will also vary; some suit conservative traders, while others suit aggressive traders. I will definitely use the most suitable methods to genuinely solve your problems and assist you in exiting.
There is a 'foolproof' way to trade cryptocurrencies, simply following the institutions to reap benefits! I'm sharing this with those who come across this article.
Do you know how to trade using the best fractal trading strategies? This fractal trading strategy will answer all your questions about fractals. You will learn step by step how to use this strategy to achieve stable profitable trading.
Today, we will delve into a strategy using the Bill Williams fractal indicator and the Bill Williams Alligator.
Before we start using fractal strategies for profitable trading, I would like to introduce some background information about Bill Williams himself. This will help you understand the importance of these special indicators. Meanwhile, I recommend reading about 'adding' and 'reducing' positions in trading.
Overview: Mastering Bill Williams' fractal trading method.
Bill Williams is a well-known Wall Street trading master, a former psychotherapist, and the founder of Profitunity Trading Group, with over 49 years of trading experience (1932-2019). He authored three bestselling books—(Trading Chaos), (New Trading Dimensions), and (Trading Chaos: Second Edition)—which promoted the dissemination of his unique trading philosophy. His theoretical themes cover the fractal structure of Elliott Wave, the Money Flow Index, and Wise Trading methods, among others.
Bill Williams has a profound knowledge of stocks, commodities, and foreign exchange markets, which has driven him to develop many technical indicators, including fractal trading patterns. These indicators include the Accelerator/Decelerator Oscillator, Alligator, Awesome Oscillator, Fractals, Gator Oscillator, and Market Facilitation Index.
Each indicator has its specific value. If you can understand the basic concepts of each indicator, they are all very useful tools in trading.
His market view is: If you want to make money trading, you must be able to understand the basic structure of the market. You also need to understand the internal components of the market, which he refers to as 'dimensions.'
These 'dimensions' include the following aspects:
◔ Fractals (phase space)
◔ Area (combination of relative energy and strength)
◔ Momentum (relative energy)
◔ Deceleration/Acceleration (relative strength)
◔ Balance line (strange attractor)
There is much more to say about Bill Williams, but the most important point is: his market analysis and perspectives are unique. While some claim these powerful indicators are outdated, they remain very effective when applied with the correct strategy.
His indicators are usually pre-equipped on most trading platforms. These indicators are typically categorized under his name 'Bill Williams' or 'Williams'.
Unlock the power of 'fractal breakout': the key indicators to successful trading.
Bill Williams fractal indicator: How to use fractals in trading?
The fractals shown in the image below are actually arrows above or below the candlestick chart. These fractals form when five consecutive K-lines are arranged in a specific way. You need to wait for the fifth K-line to close to determine whether a peak or trough has occurred in this set of K-lines.
We will further elaborate on this fractal indicator and teach you how to use the 'Alligator line indicator.' You can find the fractal indicator on MT4 or other mainstream trading platforms. There is no need to download additional fractal indicator plugins as it is already pre-installed on the platform.
How does the Bill Williams Alligator line indicator work? This indicator consists of 3 specific moving averages:
1. The 13-period moving average is called the 'Jaw' (blue).
2. The 8-period moving average is called the 'Teeth' (red).
3. The 5-period moving average is called the 'Lips' (green).
We will delve deeper into this indicator later. The reason these three lines are named as such is that we will frequently refer to them in the strategy.
Here is what the Alligator line looks like:
The above indicators are just two of the five indicators developed by Bill Williams.
As shown in the image above, these are all 5 powerful indicators that come built-in on most trading platforms.
I do like each of these 5 indicators, but after extensive research and testing, I found that combining the Alligator line and fractal indicator is not only the simplest way to use these indicators but also very powerful under the guidance of the correct strategy.
Now, let's delve deeper into what a fractal structure pattern is.
What are fractals in trading?
Williams' fractals are reversal points on the price chart, i.e., swing highs and swing lows. As mentioned above, the fractal pattern consists of a structure of five consecutive K-lines, where:
◎ The middle K-line is the highest point.
◎ Alternatively, the middle K-line is the lowest point.
There are two K-lines on each side of the middle K-line. Please note that if the middle K-line is the highest point (or lowest point) among these five K-lines, the fractal indicator will display an arrow above (or below) it.
Note*: According to Bill Williams' work (Trading Chaos), fractals can also be composed of a structure of 3 K-lines, where the middle K-line is the highest or lowest point among these three.
As a general rule, a fractal requires at least 3 K-lines to form.
If you are a day trader or scalper, you should use fractal structures composed of 3 K-lines.
Below is an example of a low point fractal composed of 3 K-lines:
However, if you are a swing trader, we recommend using higher fractal settings.
You can use any odd number as the fractal length, such as 5, 7, 9, etc.
Below is an example of a high point fractal composed of 5 K-lines:
Although Williams' fractals rely more on visual recognition than on mathematical formulas, for those who want to delve deeper, here is how to calculate fractals.
Understanding the formulas behind fractal indicators.
The calculation of fractal indicators involves multiple 'if conditions.'
For a fractal swing high, we use the following formula:
◎ High(N) > High(N−2) and
◎ High(N) > High(N−1) and
◎ High(N) > High(N+1) and
◎ High(N) > High(N+2)
For a fractal swing low, we use the following formula:
◎ Low(N) < Low(N−2) and
◎ Low(N) < Low(N−1) and
◎ Low(N) < Low(N+1) and
◎ Low(N) < Low(N+2)
Where N represents the highest price or lowest price of the current K-line.
How to trade using fractal indicators?
Simplifying fractal trading: A beginner's guide to the Bill Williams fractal indicator.
The basic fractal trading strategy is actually very simple.
On most trading platforms, fractal arrows that appear above the price are green, indicating a potential high point (swing high) is forming.
In this case, the high of that K-line may indicate a potential resistance level.
Conversely, the fractal arrows that appear below the price are red, indicating that a potential low (swing low) is forming, or a critical price level is about to form.
In this case, the low of that K-line may indicate a potential support level.
This fractal trading system is indeed very effective in identifying short-term swing highs and lows.
Based on these trading principles, we developed a Bill Williams trading system that can issue low-risk entry signals.
Fractal trading strategy steps: Fractal trading technical guide.
Step #1: Apply both the 'fractal indicator' and 'Bill Williams Alligator line indicator' on the chart.
The first step is to load these important indicators onto your chart. As I mentioned earlier, these indicators are built into every trading platform I know of, so this step should be very simple for you.
Once you add them, your chart will look like this:
Step #2: Trading Bill Williams fractals: Identify where the fractals appear (above or below the Alligator line 'teeth').
Note**: In this example, we are using a buy trading strategy, so all the following rules apply to buy trades.
Now let's take a detailed look at the true meaning of fractals.
Fractals represent a top or bottom. The most basic fractal indicator consists of at least 5 K-lines. So when you see a fractal on the chart, it may indicate one of the following situations:
◔ At least five consecutive K-lines form a fractal structure, where the middle K-line has the highest high, and there are two gradually decreasing highs on each side (forming a buy fractal).
◔ When the middle K-line shows the lowest low, and there are two gradually rising lows on each side, at least five consecutive K-lines form a reversal fractal (i.e., forming a sell fractal).
◔ Fractals can sometimes only appear when a K-line forms on the right side, but please note that the fractal in this case has not yet been confirmed, as the price may break through that level. Therefore, to ensure a fractal remains permanently on the chart, traders must wait for two additional K-lines to form on the right side to confirm the fractal.
◔ Fractals have what is referred to as 'high values' and 'low values,' usually indicated by upward or downward arrows.
Next, we will detail this fractal breakout trading strategy through specific chart examples.
The image above shows the unique Alligator line indicator. Now you need to pay special attention to the position of the fractals on the K-lines, especially when combined with this special indicator.
Here is a fractal example that we need to pay special attention to:
I drew a yellow circle on this specific ascending fractal. This ascending fractal appeared on a certain K-line, and this K-line is above the red line (i.e., 'Alligator's teeth'). This is the first criterion of the 'fractal breakout' strategy.
In a buying trade, a fractal must appear on the K-line above the red line (Alligator's teeth).
What happens here is that this new fractal is higher than the previous fractal, thus forming an ascending fractal on the chart.
To enter Step 3 (buy trade), the fractal must be an ascending fractal and appear above the Alligator's teeth line.
Step #3: The price trend must maintain above the Alligator's teeth for 5 consecutive K-lines (buy trade).
This is the 'magic' of the entire strategy.
In most cases, when a fractal like the one above appears, the price trend is still 'sideways'. That is, there hasn't been a true breakout in the recent timeframe. You can also combine this with the 'breakout triangle strategy' for trading.
This strategy requires waiting for at least five consecutive K-lines because this period often indicates:
1. A pullback may be forming;
2. The price may be at a precursor to a reversal;
3. Or the price is still oscillating in a flat sideways market.
Regardless of the situation, if you are looking for a strong upward trend, these conditions are not ideal signals.
As you can see, during these five K-lines, the price trend remains stable, with no significant ups and downs. This is precisely the situation to observe when using this strategy.
Before we continue to explain this strategy in depth, let me clarify what situations could lead to a 'reset' of this strategy, making future buying trades ineffective:
1. Reset conditions: If a sell fractal appears below the Alligator's teeth line before opening a position, it will trigger a reset. As shown in the figure below:
2. As shown in the figure, if this situation appears in our previous buy trade example, we should deem this buy trade invalid and look for other opportunities. The reason is that this may signal a long-term bearish trend, and if you plan to go long at this time, it would not be wise.
3. Reset conditions: If any of the K-lines confirming the fractal in Step #1 cross after that, it will also trigger a reset. As shown in the figure below:
Step #4: The price must break through the fractal K-line identified in Step #1.
Once you see five consecutive K-lines without a significant decline, and the price remains between the high of the fractal K-line and the Alligator's teeth, then you can consider placing an order to enter.
You can enter via a limit order or enter at market price when the price reaches the condition; both methods are acceptable as the conditions met are the same.
The illustration is as follows:
As you can see, I have marked the fractal K-line we initially discovered. Next, five or more K-lines appeared, and the price did not fall back near the Alligator's teeth line, the Alligator line did not cross, and ultimately the price broke above the high of the fractal K-line, triggering the trade.
Take profit target / stop-loss setting.
Regarding profit-taking and stop-loss, you can customize and adjust this strategy to a certain extent.
Take profit strategy:
Exit the trade when the two lines in the Alligator indicator cross.
This usually means that the Alligator is preparing to 'fall asleep' again, and the price may reverse or enter a consolidation phase.
Following the above operations, this trade could yield a profit of 70 points.
Stop-loss strategy:
Set stop-loss below the previous support/resistance area.
If the price trend is unfavorable to you and turns bearish, this will provide you with the best opportunity to save the trade. The price may 'rebound' from these areas and return to a bullish direction.
The above are all entry conditions for buying trades. For selling trades, simply reverse all the rules.
Here are the actual operational steps for the fractal trading strategy:
Fractal trading strategy practical steps: Sell trades.
1. Step #1: Apply the fractal indicator and Bill Williams Alligator indicator on the chart.
2. Step #2: A downward fractal must appear below the Alligator's teeth line, and the price must remain below the Alligator's teeth line for 5 consecutive K-lines.
3. Step #3: The price must break through the lowest point of the fractal K-line confirmed in Step #1.
4. Step #4: Exit the trade when the two lines in the Alligator indicator cross.
Conclusion: Fractal trading system.
If you have been looking for an excellent trading strategy that can be used in conjunction with these indicators, these basic fractal trading techniques will guide you. Although various strategies can be developed based on these indicators, the one we prefer in practice is this Bill Williams indicator combination strategy.
Many people believe that all technical indicators are 'lagging' and rarely provide real profitable entry opportunities. The fractal trading strategy, combined with price action analysis, effectively complements these excellent technical indicators. Therefore, if you are a trader skeptical of indicators, you might want to give this strategy a try and let us know your results.
Frequently asked questions:
1. What is the fractal trading strategy?
The fractal trading strategy is a technical analysis tool that combines the Bill Williams fractal indicator with other technical indicators to identify market trends and potential entry and exit points.
2. How does the Bill Williams fractal indicator work?
The Bill Williams fractal indicator is used to identify potential reversal points in the market. Its structure consists of five consecutive K-lines, where the middle K-line has the highest high (or lowest low), with two lower highs (or higher lows) on each side, forming a fractal.
3. What technical indicators are used in the fractal trading strategy?
The key indicators of this strategy include: Bill Williams' fractal indicator, Alligator indicator, Awesome Oscillator, and Acceleration/Deceleration Oscillator.
4. What common mistakes do traders make when using the fractal trading strategy?
Common mistakes include: relying solely on one indicator for trading, not correctly identifying market trends, and overtrading.
5. Can fractal trading strategies be combined with other trading strategies or indicators?
Yes. It can be combined with technical tools such as moving averages, support and resistance levels, Fibonacci retracements, etc., to enhance the reliability of the strategy.
6. How can traders maximize profits through fractal trading strategies?
Traders can maximize profits using the fractal trading strategy by combining indicators, accurately identifying trends, using other technical analysis tools to confirm signals, and following a clear trading plan.
7. Which trading styles is the fractal trading strategy suitable for?
This strategy can be applied to day trading, swing trading, and long-term investing, and can be adjusted according to the trader's preferences and goals.
8. Can beginners use fractal trading strategies?
Yes. Even inexperienced beginners can use it, but it may take more time to learn the basics of technical analysis and the use of related indicators.
9. What resources are available to help deepen the learning and mastery of fractal trading strategies?
There are many resources available to help further learn and master fractal trading strategies, including books, online courses, and trading communities and forums.
10. Which platforms and brokers support fractal trading strategies?
Currently, most trading platforms and brokers support fractal trading strategies, including MetaTrader 4/5, TradingView, and Interactive Brokers. Traders should study different platforms and brokers to find the one that best meets their needs and preferences.
Having traded cryptocurrencies for ten years, experiencing three years of losses but enjoying seven years of profits, I now rely on it to support my family! Throughout this process, I have summarized six important experiences that, while simple, are extremely practical.
Focus on strong cryptocurrencies: When trading, keep an eye on those that perform strongly. If unsure, look at the 60-day moving average, enter or increase positions above the line, and exit in a timely manner below the line. This trick works most of the time.
Avoid chasing highs: When the price of a cryptocurrency rises more than 50% in one go, don't rush to chase in, as it can easily lead to panic. Buying at lower prices is often more stable, carries less risk, and often has greater profit potential.
Recognizing upward signal: Typically, before a significant rise, there will be some precursors, such as the price fluctuating within a small range of 10% to 20%, but with relatively low trading volume. At this time, you can gradually buy in at lower prices, often catching the upward trend.
Seize new hotspots: When the market sees new hotspots, the first few days are usually very hot. At this time, following the footsteps of large funds often leads to easy profits.
Stay calm during a bear market: When a bear market arrives, keep your hands steady, and it's best not to move for at least six months. During unfavorable market conditions, try to trade less; learning to rest is what distinguishes expert cryptocurrency traders.
Regularly review and adjust strategies: Review your operations weekly, not just looking at how much you've earned, but assessing whether your strategy is correct. If it is, stick to it; if not, adjust it promptly. Over a few months, trading strategies will become increasingly robust.
Remember, success is not accidental; it belongs to those who are always prepared!
Playing in the cryptocurrency world is essentially a battle between retail investors and institutional investors. If you don't have cutting-edge news or firsthand information, you can only be cut! If you want to layout strategies together and harvest from the institutions, check my homepage. Like-minded cryptocurrency enthusiasts are welcome to discuss.
The martial arts secrets have been given to everyone; whether you can become famous in the world depends on yourself.
These methods must be saved and reviewed multiple times. If you find them useful, please forward them to more people in cryptocurrency trading around you, follow me, and learn more practical information from the cryptocurrency world. Having weathered storms, I would like to provide an umbrella for retail investors! Follow me, and let's walk the path of cryptocurrency together!