Advanced system #5 (Trend Lines Breakout System)

Re my post above on 'true validation', today was a good example on GBP/USD as it was the 0900 (London time) candle which was the swing point, and it was subsequently validated by the 1000 candle. The 1100 candle is currently in progress and no breakout to either side has yet occured, so its a good example of where you might have to use the actuall 0900 (5th candle) for the swing point and in this case it genuinely validated by the following candle, without any early breakout to confuse the discussion.

Cheers, Johnny.

Thanks Edward for clearing that up, much appreciated. Also excellent website!

Hi Edward,

I have looked at this strategy in detail from Jun-09 to Sep-09 and the results are very impressive. This strategy was submitted in June 2007 and a couple of years latter, it still appears to deliver very good results. In my testing, I found that it appeared to work better moving the 5 candle range from 0am to 4am EST (4am to 8am GMT) to 1am to 3am (3am to 7am). I thought about the reason for this. My conclusion was that we are looking for a trading setup condition in the 5 candle range leading into the London open. The 5th candle is 8am GMT (following your rules). However, in Londan, daylight savings started on Sunday 29 March 2009 and finihses on Sunday 25 October 2009. This means that trading starts 1 hour ealier. So, do you take daylight savings into account? That is, when the London open occurs one hour earlier due to daylight savings, do you move the 5 candles forward one hour so the 5 candle setup is the same, relative the London open?

Hi Edward,

I just posted a comment about daylight savings and moving the 5 candles 1 hour forward. I am thinking I have my times incorrect. I am in a little confused as I am at GMT+10 and so out of sync with both EST and GMT. I have posted a chart that shows the lines I have been back testing offline for this stategy and they work well. The first blue line is my starting line. Can you compare that to your charts and tell me if I am starting at the same time as you would do? Before I go live with this method, I need to get this confusion out of my head :-) Also, is New York midnight EST midnight?

Can't see your chart but it looks like you're in Australia, just like me (Melbourne). I suggest you forget about EST and GMT altogether, and focus always on London local time, as it is the London market opening that this system relates to (regardless of daylight savings). You might have to adjust your own chart reading to accommodate this, but you make your reference always as London local time then you should be consistent throughout the year.

On that basis, I believe the 5 candles that Edward uses are 0500 through to 0900 (London time), meaning the 5th candle will not close until 0959. Please see me post above 5 posts back re validating swing points around this time (as I'm also keen to see Edward's perspective on my question there).

Keep in mind that the London session is often the reverse of the Asian session and that's why I think maybe the 0900 is good as the 5th candle (especially if you're showing good results with that???). Also keep in mind the London pull back or rubber band effect which occurs around the open, which in essence can be a false breakout which you're trying to filter.

Does this help?

Hi,

I use NY time, which is EST. New day starts at midnight NY time. Whenever there is a daylight saving time in effect, I don't adjust hours, since London also adjusts, so we're inline with trading sessions and hours.

Hope this helps,

Regards,
Edward

P.S. I wasn't able to find your charts, but you can drop me a line using our website contact form.

Hi Edward,
I'm curious if your still using this strategy exactly as shown here? I did some back testing and it seemed to me that this method as I am interpreting it has struggled recently, as there have been very few good breakouts. Could you please confirm if you are still using this method on a day to day basis?

Regards,
Chris.

Yes, I do, Chris
and use it exactly as described in the original rules, no add-ons.

Regards,
Edward