Forex trading strategy #7 (Simple breakout System)
Submitted by Edward Revy on June 18, 2007 - 07:12.
The idea behind this simple Forex trading system is to capture an early move of the price when it starts to establish its new direction/trend for the day.
As we know the Frankfurt market opens at 2:00 am EST (which is 7:00 am GMT), then an hour later the other giant - London market opens at 3:00 am EST (which is 8:00 am GMT). The European session is the first major session for each coming day.
So, what do we do?
We start with 1 hour time frame, preferred pair - GBP/USD and no indicators.
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Hi Ed -
What do you consider a re - entry into the range. It sometimes happens that I miss the 1st breakout of the day and then have to wait for the next signal later in the day. I'm not sure what to look for with the 2nd or 3rd signal. Do I need to wait for a closed 5 minute candle inside the range again or can i just wait for the price to retrace back into the range then wait for the closed 5 min candle outside again?
Thanks for a fantastic site and all the help!
Regards
Dean - SA
Hi Dean,
Consider trading only the first breakout. If missed out, leave it and move on. Timing plays important role for this Forex trading strategy and the first breakout after early morning consolidation is traders' best opportunity to profit.
Later, re-entry into a range (either as a retracement or a closed candle) is no longer watched..
Best regards,
Edward
Hi Ed -
Just an interesting observation regarding the false signals. It's really simple. Most of the false signals / whip saws this month (Aug 08) have been buy signals (long) and its pretty obvious that we are in a neg trend (GBP/$ and Euro/$). So if the signal is opposite to the trend - we can expect a false breakout and a retracement. Its not to say that all the breakouts against the trend cost us pips! Its just interesting to note that most of the false signals occurred when getting a buy signal in the neg trend. If you had to set a 20 pip SL for the buy signals for Aug 08 and use the other side of the tunnel as your SL for the sell signals - you'd have had very few losses with you shorts.
So maybe its a good idea to use the trend to establish the size SL you should be using.
Good luck
Thanks
Dean SA
Without a doubt :)
Thank you Dean, for this informative highlight!
Following the trend is the healthiest option.
Best regards,
Edward
Hi Edward, thanks for your insight. I was wondering if you have tested going to a 3 minute time frame to get a better entry.
Richie
Hi Richie,
I haven't tested it on 3min time frame.
I think it can be done, not a bad idea.
Regards,
Edward
hi Edward,
thank you very much for sharing this good trading strategy.i am a newbie in FX trading, i may ask silly questions.. hope u don't mind
a) you were saying 6-7am GMT what does it mean? which candle should we take to get the HH and HL
b) would appreciate it very much if you could provide which candle to take to get the HH and HL of the following pairs i) GU, II) EU, III) UJ
thank you very much
kok-from Malaysia
sorry edward.. i mean highest high and lowest low
sorry about that
kok- from malaysia
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