Advanced system #4 (Early bird Breakout System)

Thank You Very Much Edward.

Kind Regards;

Manus168

Hi Manus168,

It'll be from 11am to 4pm your local time.

Regards,
Edward

Dear Edwards;

I lived in Indonesia - Jakarta can you helped, what time i must used according 00:00 EST to 05:00 EST ? Thanks for your help.

Regards;

Manus168

Hi Xinquan,

Current strategy suggests using hours according to EST.

Sometimes breakout starts earlier, as you've mentioned.
But oftentimes during the first few hours in the morning price hesitates to choose a trend for the day. It would go up and down and since there is very little traders trading during the early EST hours, there is a very little probability to be on the right side of the trade.
Only by 5am the choice is made to the extent that we can trust a new breakout move.
That's a common pattern observation, nothing more. You can, of course, develop your own approach, my 5 hour candle range is what works for me.

Kind regards,
Edward

Hello Edward,

I am living in Tokyo and trading during the Tokyo day time. One question here about this system is, the system requires that we need to wait for 5:00 am EST, which is 6pm Tokyo time. However, I found that for the pair GBP/USD and EUR/USD, they began to "breakout" as early as european session starts, that is 2am EST, 3pm Tokyo time.

Why we need to wait until 5:00 am EST? By that time, the breakout usually finished already?
I am still very new to FX, please kindly share your thoughts,
Regards,
Xinquan

Hi Vlad,

The final touch was made in 2007. Back then I simply tested it against historical data. It worked well.
I don't know why it suddenly starts losing money like that.

Rumors have it that when a consistent pattern is spotted (in our case a profitable breakout) by large market movers, they come up with a counter system. I don't know..

The only thing I believe in is that strategies which rely on certain time/specific hours are more prone to changes in performance over the time than other strategies.

Also consider that the number of people trading Forex grows immensely each year. In 2005 there was much less traders trading breakout methods than nowadays.

I'm afraid I don't have any more backups to confirm the results you're getting. Plus you've modified strategy to your own standards. But even then, I still like the concept of the system and believe it can be used as a base, with some tweaks from time to time to keep up with market tendencies.

Kind regards,
Edward

Hello Edward.

First of all, thanks for all the good information you have in your web site.

Ive been testing a strategy called Hans123 which is a breakout system very similar to this one.

Ive changed it a bit to use all the "rules" you have in your system. But Im also using a trailing stop of around 45.

These are the external variables we can set.

extern int Start1=14; //begin of the first session; time adjust by your broker time
extern int Start2=14; //begin of the second session
extern int EOD=24; //time for closing orders at end of day
extern int FridayClosing=23; //broker friday closing time
extern bool FirstSessionOnly=1; //if it equals 1, it trades the first range only (for testing)
extern int Length=5; //length of range for determining high/low
extern int Pips=5; //trigger above/bellow range
extern int StopLoss=50;
extern int BreakEven=35;
extern int TrailingStop=45; //if equals 0, it uses breakeven
extern int TakeProfit=70;
extern double Lots=1;

For some unknown reason the system seems to work really nice for some time and then it starts losing a lot of money

For instance back testing it in 2005 makes it unusable as we would lose all initial money (10.000 dollars).

but if I use it on 2007 it will grow until April 2008 and then start losing money again.

Also, for some reason If I set start time for 10am GMT it get a much worst profit than if I use it on 14pm GMT 0.

When did you develop this system? was it based on analyzes of the current year? or historical data?

Can you share more info about how it was created?

Vlad

Thanks Edward for the useful reply.

Cheers.
Tom

Hi Tom,

First few hours in the morning price is often hesitant to move in either direction, it looks up and down trying and testing the strength of buyers and sellers, examining closest support/resistance levels from yesterday. By 5am the choice is made. Some even say that by 4am it is all clear. I've found that with the 4th morning candle price makes its first major turn.
Keeping that in mind I've come up with a range given in the strategy.
Overall, it's a result of observation and finding common patterns.

Regards,
Edward

Dear Edward,

The Early Bird breakout is a good strategy to use. Could you let me know the rationale behind using the Highest High to Lowest Low from 00:00 to 4:59 EST? I've been using the strategy without knowing the reason behind the 5 hour range. Please let me know.

Cheers
Tom

OK thank you Edward. I appreciate it.

Hi Tom,

There will always be a movement in Forex market due to huge volume of participants.
And those participants, they don't live in a news-to-news cycle, they constantly evaluate the market and make investments.
Also many Forex traders give preferences to technical analysis vs fundamental.

Regards,
Edward

Ok thank you Edward. I think I know what to do with regards to important news to be announced later on in the day with Early Bird breakout.

On the opposite occasion of no important news from Europe or U.S. to be announced regarding my Eur/Usd pair, is that particular pair likely going to have any breakout in any one direction at all on that day? If it does, what could be the possible reasons?

Thank you for your helpful replies to us traders. Cheers.

Tom

Hi Tom,

Good question.
When huge news like Non-Farm Payroll are due I do the following (with whatever strategy I choose to trade that day):
1. Analyze forecast reports. The prognosis tells me in advance what to expect, e.g. whether news for the currency are expected to be positive or negative, which helps to decide on the direction I want to trade that day: up or down.
2. Trade my regular strategy normally, however, pick only those signals, which comply with a chosen direction: e.g. if upon news forecast I decided to be a Seller, I should take only Sell signals that day.
3. If my strategy gets me into the trade before news time, I double check that my Stop Loss order is in place and then trade according to the regular rules.
4. If I haven't had any positions running, I never enter a trade during news release and make sure all pending orders are canceled before news hit the air.
All-in-all, the idea is pretty simple:
look at forecast and choose your trading position. If trading opportunity comes before news, take it and trade normally, make sure to set a stop order. When news come, don't initiate any trades. After news, wait for at least 20 minutes before considering new trades.

Regards,
Edward

Hi Edward,

Could you let me know whether there are any adjustment we should make to this strategy or should we trade this Early Bird strategy at all if on that particular day there is or are important news announcement later on in the day eg like Non Farm payroll which can drastically move the currency pair concerned.

Please let me know. Thank you for all your kind help to us traders.

Tom
Malaysia