Systematic and Data Based Trading
The following is an unpaid testimonial by Michael L., a Certified Financial Technician (CFTE) and editor of German trading website AktienKaufen.com. This article originally appeared there in German, and has been translated and approved by Michael. The following does not represent the views of fractalerts or constitute professional advice.
Fractal trading in financial markets has been on everyone’s lips for the last few years. With the increase of algorithm-driven trading strategies, private investors are growing more familiar—and intrigued.
Fractals are mathematically calculated patterns in price movements, frequently based on historical data of price, volume, and duration. By utilizing fractals, one can analyze price movements from large historical patterns to the smaller details to identify and anticipate potential market developments.
Without going too deep into the mathematical foundations, we [at atkienkaufen.com] want to let our readers know about fractalerts, a fractal-based alert service that allows subscribers to trade systemically and unemotionally.
Since 2007, fractalerts has been active in US Indices, Commodities, and Forex trading, allowing subscribers to trade completely systematically. Algorithms based on fractals, as described above, determine the trading signals.
Subscribers receive these alerts on the day before they have to trade, so they can place their orders accordingly. Since trades are executed at fixed times, fractalerts’ strategy is very easy to understand and plan around.
Swing Trading in Indices, Commodities and Forex
The trades have a time-horizon of several days to several weeks, aiming to benefit from short- to medium-term trends in financial markets, while avoiding decisions based on emotional reactions.
Because there aren’t too many alerts, the order-costs remain low and the trading strategy can be implemented completely stress-free. The Index trading signals are based on futures and ETFs of major US stock indices (S&P 500, Dow Jones, Russell 2000, Nasdaq 100). In Commodities, the signals cover gold, silver, and crude oil. In Forex, fractalerts generates signals for five major currency exchanges: EUR/USD, GBP/USD, AUD/USD, USD/CAD and USD/JPY.
fractalerts’ strategy is to always be in the market. That is to say, the positions are always inversed after the next trading signal—a long position is always flipped to a short position and vice versa. You should be aware of potentially high volatility and choose the size of your traded position with care, particularly in the Forex markets or when moving to a futures-based strategy. fractalerts itself does not provide trade sizes; it simply supplies the trade signal with a short explanation.
We’ve been testing the service since mid-2014. The performance, currently about 16% return in 8 months (equivalent to about 24% per annum) is very promising. The S&P 500 gained about 8.6% in the same period, meaning fractalerts outperformed the market by almost 100%.
Note that we’ve traded all the signals (Indices, Commodities, and Forex) manually and implemented the strategy with ETFs. The available performance reports date back to 2008 and are available upon request.
According to the data from fractalerts, the trading strategy achieves a long-term hit ratio of 56-59%, which approximately corresponds to our experiences so far.
According to fractalerts, its trading signals moved volumes of over $1billion in the financial markets. The company serves both institutions and individual traders.
The fractalerts service doesn’t come cheap, but provided that it’s profitable in the long run, as stated in the company’s reports—our own data and experience is too limited for a final judgment—it should be a good investment. If the indicated performance of the past 7 years can be achieved on a permanent basis, fractalerts are worth the cost.
Interesting for Professional Traders Looking to Diversify
From our point of view, fractalerts isn’t really appropriate for inexperienced traders, since following the strategy requires experience in managing positions and risk. Additionally, the fractalerts strategies make more sense at larger position sizes. In order to be able to meet the margin requirements for futures or trade with a reasonable volume in ETFs, you’d probably want a trading account of at least €25,000 (roughly $27,500, as of May 2015).
In Forex markets, you could start spot-trading with smaller amounts due to the high leverage, but you should be careful with position size—since the strategy is always in the market, news or unexpected events can lead to high volatility. Aside from that, you should also consider the cost of financing in Forex swing trading. For professional traders with accounts of at least €25,000, the alerts can be useful for diversification purposes. Additionally, you can also use the alerts to validate your own trading strategies—you shouldn’t blindly trade out of a sudden emotional urge.
According to the company, fractalerts is planning a completely automated trading solution for customers, eliminating the need to place trades manually. [Note: this service, fractalgo, is now live.] Interested traders can visit the website.