Advanced system #5 (Trend Lines Breakout System)
Submitted by Edward Revy on June 3, 2007 - 15:20.
Breakout systems like this are always in great demand. It is quick, easy and with a proper use has a true winning rate of over 90%.
Currency pair: GBP/USD, EUR/USD - tested. Other pairs may also be used.
Time frame: 1 hour.
Indicators: none.
Trading setup:
For this Forex system to work properly a trader needs to know the basics of identifying swings high and low, rules of drawing trend lines, plus be able to use Pivot Points.
These are very simple things we believe every trader should know.
Our working range includes 5 candles: from midnight to 4:00 am EST (including the 4:00 am candle).
Optional: draw a midnight vertical line for visual aid.
Within those 5 candles look for a valid swing high and a swing low of the price.
Draw an Downtrend trendline connecting a found swing High to the most recent swing High of the previous days. (Make sure the last one is valid High to draw an Downtrend trendline through it).
Do the same for the swing Low: connect it to the most recent swing low of the previous days, make sure you are pulling the right trend line using the rules of drawing Uptrend trendlines this time.
If a trader sees, for example, no Swings High in the 5-candle range, that means there will be no downtrend trendlines this morning.
The Entry is on the break of either one of the trendlines and is immediate without waiting for a current candle to close. A protective stop is placed just above/bellow the candle that broke through the trend line.
Profit target:
Usually the whole action is unfolded within the next three candles (count in the candle that had violated the trendline but only if it closed on the other side of the trendline).
So, after the actual breakout we have 3 hours or 3 candles to trade, after that we will exit with whatever profits are made.
Main rule: Using Pivot points + timing
Profit target is going to be the nearest level of support or resistance according to Pivot point levels.
If, however, after only one candle this target is reached, it suggests a very strong market, thus we would stay in trade and set the goal for the next support/resistance level. We would also choose the second Pivot point level of support/resistance as our profit goal if the first Pivot level appears to be too close to our entry point.
We have three candles to trade after the breakout, that's why we can trade calm and allow our goal to shift to the next Pivot Point level.
It is an absolute traders' discretion of whether to set the target at the nearest Pivot point support/resistance level and leave the trade once the target is hit or using a timing factor exit after the two / maximum three consecutive candles.
Tip: running two orders can save lots of nerves. First target - the nearest Pivot point support/resistance level. Second - on the close of the third candle.
Another simplified option would be with fixed targets and timing
For example, EUR/USD target = 20 pips - spread, GBP/USD = 40 pips minus spread. These are only suggestions, and for other currency pairs = testing will tell...
Hold position open for the next three candles.
If the target is not reached within those three candle, close all trading positions anyway.
That's it. Simple and very effective.
Happy Forex trading!
http://forex-strategies-revealed.com/
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hi my name is victor,i am verry greatfull for the job your team is doing ,to be frank i tested this verry trend line breakout trade only that i entered verry late but following your rules i made 17 pips before the clse of the third candle thank you for that.And i will please like to know how i can dictate entry points during retracement. thank you once again
Thank you for your feedback.
This Forex trading system does not suggest further re-entries after a breakout + 3 hours trading, since the most profitable hours will be left behind and there is very little point to take additional risks for the day.
However, if you want to add another order on a retracement you can do it when the price comes back to test a recently passed Pivot level.
Profitable trading!
Edward.
Hi,
This appears to be a symmetrical triangle not a descending triangle. The apex is at located just before the price falls at 04:00 and the two roughly equal lines extend to the base at 08:00. At far as I am aware, a symmetrical triangle does not give off any positive or negative movement indicator unless one measures volume at the point of the apex to see if it is high or low.
The only triangle configurations that give off any definitive signal are descending or ascending shapes. However, no such configuration is seen here.
I am just confused could you clarify.
George
You're trying to apply your good knowledge of types of triangles to this strategy.
However, this particular trading method has no concern about the type of the triangle a trader may see appearing. Here we use only correct up- and downtrend trendlines and never analyze the chart patterns.
The idea behind this Forex system is based on knowledge of power of a trendline breakout at the Right Time.
All the best in your trading!
Edward.
Hi,
How do I calculate the PP? Should I take only the 4:00 EST candle, or should I make an average of the 5 candles?
Thanks.
Frank,
Hello Frank,
Pivot Points are calculated for the whole previous daily range. From midnight (yesterday) to midnight (today).
Edward.
Hi Edward,
You are doing an excellent job with your systems. Your kindness is greatly appreciated. With your expertise, I am sure that you are extremely wealthy. I have tried this system for the month of June and the results are phenomenal. Of 45 trades placed, 40 were profitable.
I have found that following the breakout, the price remains above the pivot point at London market opening, you can let the trades run. Today was the perfect example. Following the breakout on the EUR/USD, the market moved 27 pips then remained there for four hours. I moved stop loss to lock in 10 pips (this was above the pivot point) and just waited. The EUR/USD then rallied a further 60 pips. A similar thing happened with the USD/CHF and the EUR/JPY.
I would recommend that after locking in some profits just, leave the trade for the day, unless fundamental data will be released later in the day. I use Fibonacci retracements/extensions to trade, however, pivot points work very well with this strategy. The most important thing is to draw the trendlines properly and accurately. Happy trading.
Terrence Muir
www.forexnetworth.com
Hi Terrence, out of curiosity how did you get 45 trades out of the month of june? It is a morning breakout 1 trade a day from what I can tell?
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