Forex trading strategy #7 (Simple breakout System)

Hi Edward,

I'm new with Forex. Pardon me if my questions sound silly.

does this strategy only work for short-term trading (1 hour frame)?

if no, should we adjust the tunnel or use it for one day trading?

btw, I'm on the other side of the world, in sydney, how I can apply this strategy? what pair currency should I trade?

I can chase the first 2 hours of Europe and US market (before I get sleepy). Any adive welcome.

I'm not sure about some points in your strategy. please see below.

watch for the whole 5 min candle to close "outside the tunnel" -- I assume top horizontal line and we go long?

"We are aiming at at least 20 pips profit" - what if the price move back inside the tunnel? or move against our assumption above.

"or simply exit within the three consecutive hourly candles" -- do you mean we wait till 3 hours?

it's a great website!

TIA
anthony

Hello Dr.Ashraf,
In case you were born in Sudan and went to Donetsk Medical University(1989-1997),we were classmates.Iman(My sincere to everybody apology for using this page for purposes for which it wasn't meant to be).

Hi Anthony,

There are no silly questions. Not asking questions when they should be asked is...
This strategy is solely for 1 hour trading because it relies on the certain hours - opening of the London session.
Even if you are in Sydney, this particular strategy should not be altered, means if you want to use it, you have to trade the exact hours mentioned there.

These type of strategies which rely on certain time periods were "designed" to be traded during the exact suggested periods. So, trades that are "lucky" to be in front of their monitors during those hours - trade it, others move on. My advice, don't distress yourself with Forex, always have good sleep, move on if this timing does not fit in your daily schedule.

Here are the answers to your questions:
"Watch for the whole 5 min candle to close "outside the tunnel" -- I assume top horizontal line and we go long?"
- Right. Here on the picture above it is the top horizontal line.

"We are aiming at at least 20 pips profit" - what if the price move back inside the tunnel? or move against our assumption above.
- if the price moves back in the tunnel, I do nothing and wait for either my stop to be hit or my profit target of 20 pips to be reached.

"or simply exit within the three consecutive hourly candles" -- do you mean we wait till 3 hours?
- Yes, exactly, after the entry wait 3 hours and then exit. It is quite simple and works great!

Happy learning and trading!
Edward.

Hi Edward

Should we wait for a proper and whole candle stick to close outside the tunnel or can we enter trade even if we see a Doji close outside the tunnel. Are trend reversal candle sticks like Dojis, Hammers, Shooting stars etc. going to make any difference because we are dealing with a very short time frame. Thank you.

Krishna

Hi Krishna,

Thank you for bringing up this good question.
Reversal candlesticks like Dojis, Hammers, Shooting stars etc. are definitely not the best candles to encounter during a tunnel breakout because we are looking for trend continuation after exiting a tunnel, not price reversal.

Therefore, it would be wise to wait another 5 minutes in order to get confirmation either of trend continuation or false breakout.

Traders who decide that additional 5 minutes is very long time to wait, can switch charts to 1 minute, where once 1 min candle passes the previous limit set by a 5 min breakout candle, they can fill an aggressive entry on the open of the next 1 min bar.

Happy Forex trading!

Edward.

|Dear edward,
thanks for sharing this strategy with us. i have a comment about it when the channel is wide(i mean over 30 pip for gbp/usd) like what happened today (25-9-2007) and many other shots before it will be better to reverse the stratgy (buy when a whole candle close under the lower line of the channel and sell when it close above the upper line of the channel).
i see it goes to the target quickly and the target will be 20 at least or the channel wide.
i don't know if i am right or wrong so i want your opinion.
by the way i am using the candle which is open (9 am kSA time) and close (10 am ksa time)
waiting for your reply
Best regards,

Trading yesterday's market 25-9-2007 in a reverse mode that you've proposed would be rewarding indeed, but how much confidence would you put in each entry and how long would you tolerate the price going against you before actually reversing in your favor?

Your approach is quite interesting and I think we could look further into this reverse mode, providing that we can find some additional confirmation signals to be able to trade it with greater confidence.
Thank you.

Best regards,
Edward.

Hi Ed,

Thanks for the strategy. I'm a newbie and just testing the strategy. Can u please define low or no trading time zones for gbp/usd, eur/usd and usd/jpy (i.e when we usually have low volatility)? With that i think i cn find my 1H candle accurately and draw my channel lines.

Also please explain the issue of combining bollinger bands to fine-tune the strategy.

Emmanuel