I tested a trading indicator that is basically a big illusion.
But I took 200 trades with it to see if it actually makes money or not.
If you look at this indicator in the past market, you might think that this is the most accurate indicator ever created.
I mean, it shows the end of the reversal like this pretty accurately.
But it’s a lie.
Have you heard of indicators that change their signals if they are wrong?
Well, this indicator is like that.
If you use this indicator in the live market, you will many times see this arrow appear and disappear.
That’s because it uses the future price movement to show this arrow.
You see, the indicator I am talking about is the fractal indicator.
A normal indicator usually uses past price data to show an arrow or something.
This fractal indicator uses two candles from the past and two candles from the future to show its arrow.
If the two future candles have not closed yet, the arrow can appear and disappear.
And that can create an illusion or make this indicator look too accurate.
You see, this indicator tries to show the end of the reversal.
For example, this red arrow appeared when the downward movement ended, and the green arrow appeared when the upward movement ended.
But if you had used the indicator in the live market, the green arrow would have appeared multiple times on this upward move before disappearing.
So when you use this fractal indicator in the past market, it gives you an illusion of being too accurate.
Remember that the entry, in reality, is nowhere near the candle that gave an arrow.
It’s actually at the closing price of the second candle that formed after the arrow.
But illusion or not, does this fractal indicator even work?
Well, in the mostly good market, I have tested the fractal indicator before.
It had around a 38% win rate.
Since we used a 1.5-to-1 reward-to-risk ratio, the break-even win rate was 40%.
So this 38% win rate was around the break-even point.
But that was only in the mostly good market.

I want to see how high the win rate can go if I take 100 trades in the extremely good market.
And I want to see how badly the indicator can suck if I only take trades in the extremely bad market.
One thing you can’t ignore about this indicator is that it is really messy.
If you zoom out of the chart, you will see that it gives many entry signals frequently.
So we need to filter out the false signals as much as possible.
In the previous testing video, I used the alligator indicator to filter the false entry points.
I used that combination because the fractal and the alligator indicators were created by the same person.
The alligator indicator can be really helpful to identify the trend direction.
The indicator will come with three lines.
On this chart, the green line is called the lip line.
The middle one is called the teeth.
And the bottom blue line is called the jaw line.
If the three alligator lines are in this order, where the jaw is at the bottom, the teeth are in the middle, and the lips are at the top, then there is an uptrend going on.
If the jaw line is at the top, the teeth are in the middle, and the lip line is at the bottom, then there is a downtrend going on.
When the alligator indicator said there was an uptrend,
and when the fractal indicator gave an arrow below a candle, I took a long trade.
I entered at the closing price of the second candle that formed after the arrow.
Since the fractal arrow appears at the reversal point, that point is usually the swing high or swing low.
In an uptrend, I set the stop loss below the swing low, or where the arrow appeared.
I set the profit target at 1.5 times the stop-loss distance.
I took 200 trades like this with the fractal indicator on the 30-minute entry timeframe.
Since we want to see how high the win rate goes in the extremely good market and how low it goes in the extremely bad market, I went to the Gold/USD one day timeframe chart and added a nine-period EMA.

Since the price of Gold/USD has been moving in an uptrend for a while, I drew red boxes where the price was not clearly trending above the EMA.
And where it was ranging, slow, or choppy.
This way, in the extremely good market test, I only took trades where I didn’t draw the red boxes and the price was clearly trending.
And in the extremely bad market test, I only took trades where I drew the red boxes and where the price movement was bad.
I did this good and bad market filter on the one-day timeframe only.
On the 30-minute entry timeframe where I took trades with the fractal and alligator indicators, I didn’t do any good or bad market filter.
So this is what happened when I took 100 trades in the good market.
You know how I said this indicator is messy and gives a lot of entry points frequently?
In this testing series, I have also tested the Bollinger Bands breakout strategy, which was also messy and gave entry points quite frequently.
Using those spammy entry points, the Bollinger Bands ended up giving a very high win rate in the extremely good market.
But the quality of trades kind of sucked compared to other indicators.
I mean, it was just spam, not proper entry points.
Since this fractal indicator also spams the entry points, its story was also similar.
It started to win pretty much from the start.
Its profit graph started to move in the upward direction pretty consistently.
It won around nine trades in a row and lost around five trades in a row.
In the mostly good market, it had around a 38% win rate.
But in the extremely good market, it increased its win rate directly to 61%.
The profit graph also looks pretty good.
But before we compare it with other indicators, it’s time to take another 100 trades in the extremely bad market to see how low the win rate can go.
Honestly, I was expecting the profit graph to move down pretty much from the start.
I mean, with this indicator’s spammy entries I was expecting it to lose back-to-back in the extremely bad market.

I mean, most strategies we have tested in the bad market lose money back-to-back.
This strategy, even though it spams trades, managed to keep the profit graph pretty much flat.
It won six trades in a row and lost seven trades in a row.
At the end, it got a 41% win rate, which is around the 40% break-even point.
It had around a 38% win rate in the mostly good market, and now it got a 41% win rate in the extremely bad market.
We can say that this indicator will probably not give too low of a win rate.
I mean, we have tested strategies in the bad market that gave extremely low win rates, and their profit graph said you will probably blow up your account with them in the long run.
Compared to those downward-moving profit graphs, this flat profit graph is much better.
It says this fractal strategy has a relatively low chance of blowing up the account, even in the bad market.
As long as you follow proper money management rules, of course.
In all testing series, I used a 1% risk of the starting account balance per trade.
Now it’s time to give it a TR score, or the Trading Rush score.
Since it got a 61% win rate in the good market, it gets a 7.8 out of 10 in the win rate category.
Previously, I had given it a high score in the easy-to-use category.
But this time, I decided to give it a lower score of 6 out of 10.
This is because it looks different in the live and past market.
And on top of that, we have to use the alligator indicator to filter the false signals.
In the reliability category, it gets a 5 out of 10.
This is because it basically spams trades at every small reversal.
That’s not a reliable strategy.
Since its profit graph went up pretty consistently, it gets a 7 out of 10 in the consistency of profit category.
As for quality of trades, it gets a 6 out of 10.
This is a lower score because it gives an entry point at every small reversal, which is not the highest quality setup.
We have other trading strategies that gave a much better quality setup.

This fractal indicator only got a high win rate because it spammed trades when the price movement was good.
You can say this indicator got lucky and doesn’t have the skills to maintain that high win rate if the market conditions get slightly bad.
I mean, in the mostly good market, this fractal strategy didn’t even make money.
So we can confidently say that in the extremely good market, this strategy most likely got lucky and doesn’t have actual features that give you a higher quality setup.
This brings the total TR score in the extremely good market to 31.8.
Even though the strategy got a really high win rate, even higher than some of the other strategies, its TR score is the lowest out of all so far.
That’s why we shouldn’t just focus on the win rate.
Quality of trades and other things are also important.
In the extremely bad market, this fractal strategy gets a 4 out of 10 in the win rate category, which is actually a really good score.
It is one of the strategies that have a lower probability of continuously making a loss, even in the bad market.
The only other strategy that did that was the Ichimoku cloud.
All the other strategies we have tested in the bad market had a high probability of blowing up your account.
In the easy-to-use score, it gets a 6 out of 10.
As for reliability, it gets a 4.
The quality of trades score is also 4 out of 10.
But the consistency of profits is 1 out of 10.
This is actually a good thing because many other strategies were rated 0 out of 10 because they continuously made a loss.
This strategy and the Ichimoku cloud didn’t lose money continuously, so they get a 1 out of 10 score in the consistency of profit category.
That brings the total TR score to 19.
This is actually the highest score in the extremely bad market so far.
Basically, this fractal strategy spams trades in the extremely good market and gets a good win rate.
And it has a lower chance of blowing up your account compared to other strategies in the bad market.

Since this is an ongoing testing series, let’s see if we will find strategies that will get a really high win rate.
And who knows, maybe they will even manage to make money in the extremely bad market.
Thanks for watching.