Advanced system #4 (Early bird Breakout System)
Submitted by Edward Revy on May 27, 2007 - 03:54.
Another advanced morning strategy tightened to the timing factor and only two currency pairs.
Trading setup:
Time frame: 1 hour.
Currency pair: preferred but not limited to EUR/USD and GBP/USD.
This Forex breakout system uses no indicators.
Trading rules:
The system is called "early bird" because it requires a trader being ready to trade Forex as early as 5:00 am EST.
Find the Highest High and the Lowest Low for the candles from 00:00 EST to 4:59 am EST. (We should have 5 candles for each hour: 0, 1, 2, 3 and 4).
At 5:00 am EST set 2 entry orders: buy order - above the highest high +5 pips, sell order - below the lowest low and -5 pips.
Set initial profit target to +90 pips for EUR/USD and +140 pips for GBP/USD - both targets are way too high if to consider that daily range average for EUR/USD is only 110-120 pips and daily range average for GBP/USD is 180-200 pips.
If those targets get hit - very good! However, our profits will be determined mainly by the time factor instead of a fixed amount of pips.
So, we close all open positions at 12:59 EST (1:00 pm EST) and cancel all remaining orders. The next trading opportunity - only next day at 5:00 am EST.
Setting Stop Loss orders:
Stop loss for Buy order should be placed below the found earlier lowest low -3 pips, for Sell order - above the highest high +3 pips. If a stop loss is hit most likely traders will see an opposite position open. Stop loss should never be moved.
To your trading success!
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Your calculations would be next:
EST = GMT - 5. So, if you add 5 hours to EST time you'll get GMT time.
Now yours is GMT + 8... So, you add another 8 hours.
Thus, to convert any EST time to GMT + 8 you need to add 13 hours to EST time:
5:00 am EST = 5 + 13 = 18:00 (GMT+8)
You are welcome!
Edward.
This system is somewhat similar to the one I'm currently trading. So, if you don't mind, here is my version:
Only GBP/USD and EUR/USD. At 7:00am GMT look back at the previous hourly candle.
Long Entry = close price of 6:00 candle + 5 pips.
Short = close price of 6:00 - 5 pips.
Stop loss = 10 pips away from the close of 6:00.
Take partial profits at 9:00am GMT.
If by 11:00 am GMT the market has given a lot of move - close all profitable positions. If the market traded lazily, close at 16:00 GMT.
Charles
Thank you, Charles!
Your version of a breakout trading system is very interesting. We value your contribution. Great job!
Edward.
how did you identify the candle? What is the X mark on chart.
thanks
About the chart marks: triangle is an entry, X - exit.
I'm not sure what candle you meant...
If it is an entry candle - then the order there is an order which is set at 5 am and gets filled when the price makes it above or below the highlighted in green candle range with its highest high and lowest low.
If it is an exit candle - we suggest a time factor here, means we close all open orders at 1:00 pm EST.
Thank you,
Edward.
What is the significance of 5:00AM, shouldn't more weight be placed on 8:00AM when the market opens?
I agree that 8:00 am is an important time. However, traders may very often find the market starting to move much earlier. And that is where time after 5:00 am comes in place.
But, the fact that we analyze 5 morning candles will not necessarily result in immediate breakout at 5:00 am. The real move may as well occur exactly at 8:00 am during London and New York session overlap.
Happy trading!
Edward.
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