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Advanced system #1-a (Midnight setup addition: Trading Breakouts of the Breakouts)

Current trading method was developed as an addition to original Midnight Setup strategy, but can also be traded alone or in combination with any other Forex strategy.

The idea is to filter out some big portion of false breakouts in our case above/below daily candles.

Setup: daily charts and 5 min charts, no indicators.

Entry rules:
Using rules from Midnight Setup strategy we get ready to enter on the break of the daily candle's high or low.
However, this time instead of placing Buy/Sell stop orders above/below daily candle, we aren't placing any, but rather waiting for actual breakout to occur. Would be a good idea to set an alert signal on a trading platform that will call us when the first breakout is in place.

Immediately after a breakout above/below daily candle on daily charts we go to 5 min charts, where we wait for the price to finish its first advance and start retracing back.

Here comes the idea of Trading Breakouts of the Breakouts:
On 5 min chart we mark the very first extreme level set by the price (highest high or lowest low depending on the breakout direction) and place Buy Stop or Sell Stop orders +10 pips above/below that extreme. This way our order will be triggered only if the price confirms its directional intentions... Otherwise, it was a false breakout.

Trading daily breakouts in Forex

Quite often after the breakout on Daily charts, 5 min charts first extreme point reveals the real nature of the breakout. Price may never reach that extreme again, or it can come and make double top/bottom pattern and back up. Not all but many losing trades can be avoided by Trading Breakouts of the Breakouts.

Along with advantages, there are some not very critical disadvantages of this method:
First of all, we are going to enter a bit later after the initial daily breakout and thus will definitely miss some pips from the starting breakout point.
Second, if the breakout is extremely powerful, our 5 min retracement may never come or come way too late. Chances for that are quite small, usually there is always something to spot on 5 min charts, but exceptions may occur.
Third, you can't set it once in the morning and forget about it for the rest of the day. You need to be there to spot the first 5 min retracement and set appropriate orders.

Happy trading!

Truly yours,
Edward Revy
http://forex-strategies-revealed.com/

Copyright © Forex Strategies Revealed

Hi,

I checked the GBPUSD for the last year and I could find only a few days where the case which you want to eliminate (fasle breakouts) occur. And for the most of those cases if you keep it for one more day then it turns to your advantage.
And as you said already you can't set it once in the morning and forget about it for the rest of the day.

But maybe this system can be improved:
If the days candle is short (shorter then 100 for GBPUSD pair) then you can set a conditions for the next day trade only in one direction (direction of the main trade preferrably)
If the trend is unclear then set your limit equal to 50 (I think that will prevent most of false breakouts as well).

Great strategy, I made it in Expert Advisor for MetaTrader platform.. Now, I do some optimize settings on it. I'll let you know if I found your strategy working on great trades. Thanks Edward. Best Regards, syanwar Admin of Viking234

halo syanwar..can you share this EA for us?

It is not only about False breakouts, it is also about entering at the right time and saving lots of nerves for those Forex traders who like checking upon their charts more than once a day. Before an entry order is finally triggered there could be a large pullback that may shake positive believes of some traders currently watching their positions or trigger tighter stops if such were chosen instead of regular stops.

Regards,
Edward.

Hi Edward.
Im using charts with est time, my daily close time is 17h00. I draw vertical lines on the daily chart, i then wait for a break of the highs or lows, i use the 15min chart, once broken i wait for a pull back and usually confirm entry with a doji candle for the first entry, then once breaks that high or low enter again i enter second lot, I would greatly appreciate your opinion on that.
Regards Lino

Hi Lino,
does it mean you enter after 5:00pm Eastern time?
Just to confirm that I understood it right.
Thank you.

Edward.

Hi Edward, I dont enter at 5pm, i usually start looking for trades around 00h00 est time using the high/low of previous day, being from 17h00 to 17h00. Once the pair breaks the high/low of previous day i wait for a pullback, then once i see a doji i enter the first lot, then another lot when it breaks the first low. Very similar to this strategy. Been working very well in these conditions we in.

Regards Lino

Oh, right.. I should have thought better before asking.

Yes, the strategy is similar to the one I have. But you've got more, you are going in with two orders. A low risk entry after a doji is extremely attractive (I'd place a stop just outside the doji).

In my opinion this simple approach should work very well. Well done! And thank you for bringing it.

Regards,
Edward

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