Forex trading strategy #7 (Simple breakout System)

hi every1 another thing i noticed was ed mentioned you could probably do this for 1 pm london time using the 12 noon candle i tried this also and made a bit of profits on gbp/jpy but noticed i would have had a better entry if i had used th td trend lines as you can see. I had good feeling as was looking for a bounce back of pivot level and stocastics were oversold and macd both were about to turn up. Checked this also in 15 min time frame and were similar so with a combination i think it personally give me a clear picture. I couldnt get into this trade if i traded it on 15 mins chart because there was no down trade line as in 5 mins chart. I shall upload a picture and so maybe you can understand it a bit better.
Ed would like your oppinion on what you think about it

thanks karl

this is a pic of the gbp/usd chart that didnt work out earlier

also tried the 12 noon set up on eur usd as well as the gbp/jpy. I find gbp/jpy and gbp/usd very closley correlated in the 1 hour time frame so you see pretty much the same thin in that aswell. heres i pic of that.

there is also a down divergence on macd got to be aware of it. if you used just the lines it would be a 5 min break out but stocastics over bought, histogram losing down momentum and the candles are bottoming out. As you could see it did have a turn at the top as everything said but if you had got in earlier could of made a profit. at 20 pips or broke even moving stop up or like me i just left it around the R2 level but i wanted to see if it would continue back up further.

this is just a test a have done today and was wondering your oppinion on it. I has not been tested or provent to be accurate over a period of time. also the trend line break outs would be valid i guess and normally i use 15 min chart to place my trade on so this 5 mins stuff is also new to me.
thanks karl

hi ed
i was wondering if you had any other recommendation on good day trading systems as this is just one i would use on these times.

Also i find macd devergence great but some times it can be a while before it turns and you can get good moves up before it turns down any tips on getting better idea of when it may turn down.
I just seen this site so hope im not being too annoying lol
I was also using the london 8am open with td trend line to get the early morning pips but on a 15 mins time frame was ok had some good days but i prefer the Trend Lines Breakout System. think its just abit better than what i had already discovered

thanks again karl

hi Edward Revy
was wondering what you thought about the chart pics its something i havnt tested properly but think it could work and gonna test it. Also was wondering if you have anything ideas to help with timing in macd divergence
thanks looking forward to hearing from you

karl

Hi Karl,

that's a lot of questions to process... But I'll try to answer as many as I can.

If to compare Advanced #5 and Simple #7, let's just say that majority of breakout systems are very similar to each other. Adding the fact that both breakouts are expected to happen during the first early hours, we have 2 methods to work with.

There are times when either method can't be used:
Advanced #5 - trend lines doesn't always take place.
Simple #7 - the 1-2 am price range/channel could be too wide to trade comfortably.

There will be times when a breakout signal will be triggered for both systems at approx. the same time (usually when we have trend lines for Advanced #5 set before 2 am).

So, speaking of mixing systems on purpose - I wouldn't; instead I'd recommend trading each system separately; but, if the signals arrive simultaneously - that's obviously a good trading opportunity to take.

Now, when you try to apply the rules to hours other than suggested in the original rules, it modifies the conditions, which is not bad, but it doesn't allow to project & analyse the outcome for the breakouts you've highlighted on the screenshots.

Using Stochastic oversold/bought signals is a good way to confirm the strength and profit potentials of the breakout. E.g. as you've mentioned, a breakout to the upside with Stochastic reading/crossing in the oversold area - this set up doesn't have high profit hopes. On the contrary, the same breakout to the upside with Stochastic crossing/exiting from the oversold area - suggests a good chance to make good profits ahead.

I've reviewed your charts, basically what we see is trend line based trading (regardless the type of the lines - they can be horisontal (Support/Resistance) or under any angle).
This type of trading, especially with small time frames (5, 15 min) requires additional analysis & indicators - this is where I completely agree with you about the use of Stochastic, MACD divergence, Moving averages, which should improve the quality of filtering best possible breakout opportunities.
The way you're currently trading is certainly not the same approach/system as original Simple #7, but rather a totally new method, with the concept of trend line breakout in mind.
At this stage, such system is still too raw to analyse, you'll need to do some further work, especially on creating specific rules for distinguishing weak breakouts from strong ones, making rules for placing stops and projecting profits, clearly identifying the role for each indicator used on the charts.
I think this is a good system to spend time on.

I hope I was able to target your questions.

Kind regards,
Edward

P.S. I'm very sorry for the delay, it happened that I wasn't able to dedicate much time to comments in August.

Dear Edward
I think when the last candle which comes out of the chanel has a long body and closes far from borders, itis better to use fibo retracement for that. If price retraces and moves in the same direction we enter, otherwise we wait for another signal maybe in other direction. I did not test this idea yet. Please let me know your suggestion.

Regards
Reza

Hi Reza,

Experienced traders are able to recognize such price moves/candles, and while everyone rushes on a departing train, they will wait for the price to retrace and then get comfortably on board. Yes, Fibonacci is the best tool for that.

That's called a "next level trading", where with experience you tend to trade more conservatively because your experience tells you what to expect from the market.

(The risk of missing a train in this case is always less than the risk of being crashed by a train... The rule of conservative trading.)

Best regards,
Edward

hi edward
this is a brilliant site

I wish you could really breakdown this system even in more simpler terms.
I hope you don't mind

GBP/USD
1. 6am to 7am GMT and apply trend line from highest wick to lowest wick
2. go to a 5minute chart....
3. if the 8am /5minute next candle breaks out of the channel: DO WE FOLLOW THAT 'TREND' AND ENTER A TRADE on the next candle?

4. if the candle at 8am5 minute does not break.... do we wait until a another 5 minute candle does or is this strtegy over?

i am only looking for about 5 pips a trade

thanking you in anticipation

mr Anthony Rich