Volume-Weighted Fractal Signals and Breakout Lines
Summary
This document proposes classifying adjacent fractals using each fractal's price range and tick volume. It calculates a ratio called MFI by dividing the sum of five bars' high-low ranges by their combined tick volume. A comparison between two opposite-direction fractals, including their ratios and volumes, determines whether to mark a squat fractal. Lines connecting adjacent marked fractals are used as support or resistance.
The author sketches possible rules for trading line breaks and later suggests trading breakouts of squat fractals, with a possible opposite-direction trade when a false fractal appears and a stop at that fractal. These ideas are explicitly described as unfinished rather than validated rules. A later revision adds a percentage-based inner-volume filter to reduce the number of plotted fractals. The method depends heavily on tick-volume quality, and the author recommends using quotes with minimal server filtering; no backtest or performance evidence is supplied.
Key ideas
- The method scores five-bar fractals using summed high-low ranges divided by summed tick volume.
- Comparing adjacent fractals' scores and volumes determines which squat fractals receive markers.
- Trend lines across marked fractals serve as candidate support and resistance levels.
- The proposed system considers fractal breakouts and stops placed at the current fractal, but remains incomplete.
- Tick-volume quality can affect the indicator's output.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.