Advanced system #1-a (Midnight setup addition: Trading Breakouts of the Breakouts)
Submitted by Edward Revy on February 22, 2008 - 10:47.
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.
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Hi Edward
What if there is no pull back in 2-3 5mins candles after daily break through? Should we just skip the trade or enter right away?
Regards
Jimmy
Hi Jimmy,
Price rarely spikes without retracements on 5min charts. But if it does, we won't have a chance to enter.
You also shouldn't expect price to retrace within 15 minutes or so, it may easily take hours before a retracememt is complete.
Regards,
Edward
Hi Edward
Thank you for your advice. I think the retracement will help a lot in term of fake breakout. To be frank i lost quite a few pips using the first method. Mainly due to last week huge fluctuation in the market.
I am looking forward to try this method and hopefully it can cover fake breakout.
Regards
Jimmy Chung
Hi Edward
In fact i should asked you this question first. What do you mean by retracement? Does it have to retrace back to the yesterday's low or high? What if the retracement, the gap between lowest low or highest high is huge for example 40+ pips. Is it a valid entree?
Thanks a million in advance.
Regards
Jimmy
Hi Jimmy,
Yes, that would be a valid entry.
It doesn't have to retrace to yesterday's low or high. A pullback of any size is accepted. The only requirement is: it has to be the first pullback.
I haven't created any rules for entering after wide pullbacks though.
Regards,
Edward
Hi Edward
Really appreciate your comments.
Thank you
Regards
Jimmy
Hi, I am just wondering how should we set up the stop loss for this strategy
Thanks,
Victor
Hi Victor,
The concept of entering on breakouts of the breakouts, has no common patterns for placing stops. So, for me, a stop loss would be something of your own: based on charts patterns, indicators, fixed numbers etc.
Regards,
Edward
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