Advanced system #5 (Trend Lines Breakout System)

Hi Andy,

At the beginnig like any other trader I had my big moments of success and failure. I had periods of excitement changing by moments of total frustration.
The three main components which helped me to find my way out were:
- trading tiny positions
- for a long period of time
- while looking for the perfect trading tools with signals that make sense to me and comply with my understanding of market rules, trends and behaviour.
...And if your trading analysis explains balance between support/resistance forces in the market and, more importantly, enables you to project this support/resistance areas in the future, you are doing it right!

I felt that things are moving my way when I clearly saw that every aspect of my daily market analysis make sense as every new trading session unfolds.

Finally, every month or year when you summarize the performance, you see the results for yourself.
If your results look next way:
- periods of huge sell offs and or rallies => win
- slow steady trending market => win
- extended time ranging market, no trend => small win or or break even
- rocky ride, crisis related whipsaws, other unexpected market turns => break even or small to moderate loss,

you know you are trading it right, no matter if a new trade today is a winner or a loser.

Regards,
Edward

Hi Edward.
Thanks for your site. My name is Lino, im from South Africa. Iv done some demo and live trading. Iv also done an advanced trading course from my brokerage company. Your Breakout system works very well, the times work well for me too, as im GTM+2. What i wanted to ask is, can one use the support and resistance lines as stops, as iv seen on a few occasions by placing the stop just above the candle that broke the line, the pair has pulled back to test the high of that candle. Once the trade is in and going the direction intended, then i lower the stop. Another thing, i also use the 10, 20 and 40 EMA, as double confirmation with a ADX above 30 so that if trending well one can wait to reach pivot target. Your opinion would be most welcome.

Hi Lino,

Absolutely, if your risk tolerance allows and market favors it, you may use support/resistance lines for setting trading stops.

Regarding EMAs and ADX, as far as understood, you use them to identify trend strength and look for realistic profit targets which is good; I wouldn't use any additional indicators to time entries though, which I think you never meant to do.

I hope you enjoy trading with one of my favorite Forex strategies!

Regards,
Edward

Hi Edward, in your example - the initial post.

Why did you not choose the second or fourth candle, before midnight, as the valid swing high ? In both these cases they have lower highs on either side of them; this would then make them valid swing highs!

maybe I am confused so cannot see my fault in logic. please help.

thanks

Roshan

Hi Edward, I have been mulling over the question I asked above.

If the following is correct then I see the flaw in my logic.

1. A downtrend trendline (connecting two swing high points) must be either horizontal to the X-axis or point downwards.
2. An uptrend trendline (connecting two swing low points) must be either horizontal to the X-axis or point upwards.

Is this correct ?

Thanks again

Hi Roshan,

As I started replying on your first question I've noticed the second one.
And yes, you are absolutely right! The reason we didn't pick those swings is because they do not allow us to draw valid up and down trend lines.

Your definition of valid trend lines is 100% right!
Happy trading!

Regards,
Edward

Hi Edward, I understand the rationale of the pivot levels and timing that this strategy is based on.

Does this strategy loose its efficacy as we move away from the working range ? In other words, would a breakout earlier on in the day be more prone to success than a breakout later on in the day. I do know that all positions must be closed by NY close.

Thanks Edward

Roshan Naidu

Hi Roshan,

Yes, you have the point. The earlier the breakout the more consistency is expected.
If price didn't have strength to break out for, say, 6-7 hours, it often keeps running without enthusiasm after the breakout.

Regards,
Edward