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 Edward
thanx for sharing this good system with us
spread in Fxsol is 5 pips so if i entered long from 2.0510 " as i really did today " where i should i put the 20 pips ST ? , at 2.0490 or at
2.0495 ?
kind Regards,
Prince1972
Hi Prince1972,
Thank you. You should put your stop at 2.0490.
Today with GBP/USD you have a winner!
Regards,
Edward.
Hi sir
is there any similar method for the noon markets?
Hi Edward
I had 10 continous wining trades since I got live, I think this method is a good one and it is completely different than hans-123...
Could we use this mehod at opening of USA market, to look at the period from 11-12 am GMT...Do you have any experience at this period?
Your trading success is exactly what we aimed for with our project!
Thank you for your feedback.
I personally traded each and every method and system here. Opening of US market definitely provides additional trading opportunity. I would focus on 12am GMT candle itself. Take the highest high and the lowest low of the 12am GMT candle as it closes and again once 5 minute chart confirms the breakout - enter the trade.
Happy trading!
Edward.
Dear Edward
Thanks for your reply...I want to ask you about your suggestions regarding using any filter or a an indicator to detect the loosing trades...When I made a backtest , I discovered that when the distance between the 2 limbs of the channel is wide and there is no news in that day, it usually loose!!!...What do you think and what is your suggestion?
Dr.Ashraf
Dear Dr.Ashraf,
When the distance between the tunnel bounds is wide, use 20 pips stop. I worked the numbers again and those 20 pips are just enough to keep you from being stopped out.
When the tunnel is narrow, risks are small too. There shouldn't be any problem with taking a loss of 10 or 12 pips.
Indicators... I came up with an idea this morning (please test it before trusting it), and it is to use Bollinger Band with settings 10, 1.5 on hourly charts.
I would be then bias towards trading south or north depending on the place where the 1 am EST candle has closed:
If it closed outside the Bollinger Band - the price must move inside the band and so I will be anticipating breakouts only in that one direction.
If the candle closed inside the band and the band is narrow, the price should break outside the band: closing in the upper channel of the Bollinger Band would make me bias towards continuing north, closing in the lower channel - south.
If the candle closed inside the band and the band is wide, which means high volatility (usually then 1 am candle closes somewhere near the top or bottom of the Bollinger band). Then I would take trades towards the middle of the Bollinger Band.
Using this indicator may help you to choose a trading direction for the day. Combine it with the entry rules on 5 minutes charts and if both Bollinger band and 5 min chart candle "agree" on the breakout direction you've got a confirmed entry.
(Indicator settings were calculated for GBP/USD pair)
Good luck!
Edward.
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