Advanced system #5 (Trend Lines Breakout System)

Hi Edward,

Does this (Trend Lines Breakout System) technique work on EUR/USD? What is your best exit strategy with it?

Thx.
-Tom

Every trading platform runs on its own server time zone (you should ask your Forex broker about the time zone they use).
If, for example, your platform uses GMT, then your midnight candle obviously starts at 00:00 GMT.

In order to use Eastern Time, you need to adjust.

EST = GMT - 5
So, with GMT based trading platform, you'd need to start trading 5 hours later, e.g. at 5:00 am GMT.

regards,
Edward

Hi Edward,

anyway a continuation to my previous post. I will like to ask, what is the timing stated in my meta4 trader which I am currently using? it seems like it's GMT is it correct? If so, even now is following EDT timing, so I should be trading at 0400 on the software itself, am I right? thanks!

I got it.

Here is the sketch:

There will be no uptrend trendline today, because even though Candle #1 is the lowest Today, it still doesn't make a valid swing low on the general picture when we look back at yesterday's candles.

In order to draw a trend line through Candle #1 it should be the lowest and it should at the same time represent the bottom of the swing low.

Something like this:

Hope this answers your question.
Happy trading!

Edward

Hi Edward, thanks for this wonderful strategy. I just read it today but will definitely give it a try! seems accurate with past data. Anyway I do have a question about the swing high/low; hope it is not repeated.

Say for the first of the 5 candlestick has the lowest low of the 5 (which probably means we have a upward sloping trend), but the candlestick before this first candlestick has a even lower low. Then does that mean that there is no swing low in this situation?

Hope it doesn't sound too confusing.Thanks

Here is a review of the trading for EURUSD pair:

Regards,
Edward

Hi, I've been looking at the charts for EUR/USD an GBP/USD and in the past five days cannot find a single oppurtunity for this system to have worked. The reoson is because the trend breaks straght away at midnight in one direction and ther are no lows in the 5 bars after midnight because each candle makes a new low. Am i intepreting this information wrong, or is it just that while trying to compare i have been misfortunate with the charts? can you give me an example from the past 5 days trading?

Hi Barret,

1. I would highly recommend EST.
2. It should be a swing high/low;

Simply the highest/lowest price withing 5 candle range won't work, because you could have a situation like this:

3. If there is no swing low, we won't have an uptrend trend line, so we won't trade Short that day.
Same for a swing high and a downtrend line: if there is none, there will be no Long orders that day.

Regards,
Edward

Hi Edward,

Its Barret. I'm trying out this strategy and am getting confused. Queries:

1-> Should we be considering time in EST or GMT? So, if we consider EST, 5 candles from midnight EST would be about 9:00 am GMT (when the 5th candle from midnihgt EST will finish), ie. 9 am in Britain (I'm from the UK). Hence the break-out would only be after 9:00 am in the UK.... is this understanding correct? And thus, should I consider the 5 candles from midninght GMT or EST?

2-> Identifying swing high and swing low within the 5 candles..... this should be a swing high / low as opposed to simply the highest / lowest price within the 5 candles is my understanding.... is this correct?

3-> Would there be days when one cannot see a clear swing high or swing low within the 5 candles? And if so, does this mean there is no trade for the day?

Look forward to your reply and please continue the great work you and your team are doing on this website.

Rgds,
Barret

Yes, if the angle is quite steep, we can't avoid cutting into candles.
This trend line is drawn correctly, and we still can trade with it using our Trend line strategy; however, we should keep in mind that the trend line is far from being strong (because it's been violated several times already).

I would call for an additional help from Pivot points, chart patterns, support/resistance levels - anything that could give me a clue as to where the price could go and how strong would be the move.

If I can't find any clues from other studies, I will refrain from trading that day.

Regards,
Edward

Hi Edward, Thanks for looking into the charts. I appreciate all your efforts in maintaining this web site.
I've another question for you regarding the trend lines. Is a trend line valid if it cuts into candles in between? Please see the image attached..

Hi Chand,

Thank you for your screenshots.
The lines are drawn correctly. This was a bad day. EURUSD and GBPUSD mirrored the whipsaw move, as they often do in such cases.

Also, you may have noticed that in both cases before the whipsaw bar there was an Inside Bar formation. When an Inside Bar forms, traders look for a breakout on either side, however, this is also where whipsaws occur quite often.

Best regards,
Edward

Edward,
I've been experiencing some whipsaws. I am wondering if I'm using the strategy correctly as described or these are simply bad days and move on. I will appreciate if you could validate from the chart attached.

As described in the strategy I take the most recent swing high/low among the 5 candles (0:00a-04:00a) and draw a trend line with the valid swing high/low found among the previous days. I've frequently experienced that one of the candles among the 5 pierces the trend line and then retracts back in opposite direction. Your advise on such situations will be highly appreciated.
I'm uploading EU and GU charts as of Feb 09, 2009 for your review. Please advise!

Thanks
Chand

Hi Chris,
Your approach to setting a stop is 100% right.
Since the entry occurred at the opening of a new bar, there wasn't much information we could gather about that new bar, so we'd need to turn to other methods to help us with a stop. These are pivots and swings high/low. Later we would reposition a stop exactly as you've said.
I'm very glad you're doing well with this strategy.

Best regards,
Edward

Hello,

I am new to forex and have found this site a great resource. I hope I can contribute someday as my skills develop.

I am attracted to this strategy because of it’s simplicity and the time frame fits in with the Aussie afternoon/evening :)

I have a question about tight stops. Take for example the chart posted by Edward on December 7, 2008 - 14:36.

In this situation the break of the trendline and therefore entry signal occurred at the opening of the bar. So if you follow the trade rules you will set a stop say 5 pips above “the open”. Isn’t this a bit tight - leading to frequent stopping out of potentially profitable trades such as in the example above?

In this case, would you use pivot points or swing high/lows to set a wider initial stop…maybe moving it to the bar high +5 as the bar developed?

Thank you
Chris