Advanced system #5 (Trend Lines Breakout System)

Hi Edward,

on 26 october we have disabled DST , should it mean that now EST = UTC(GMT) -4 hour ?
and after march 30th when DST will starts againg EST=UTC-5h.

Andris

Hi,

use EST time. Take one hour off Alpari platform.
For scalping try Ema bands system, and the simplest - 5 pips with GBPUSD.

Regards,
Edward

Hi Scarlet,

Only when a trend line is a horisontal line, we'll have a Sell Stop order below the recent Swing Low (and Buy Stop order above the recent Swing High).

In all other cases our entry is going to be earlier than actual breakouts of recent Swings High/Low.

When a trend line is steep you do find that Entry orders are located:
Buy Stop order — below the identified Swing High from 5 candle range;
Sell Stop order — above the identified Swing Low from the same range.

Regards,
Edward

Hi Edward,

Can you tell me more detail about stop entry order, you said that you place a buy/sell stop order once you get a trendline. Where is the entry point? (above the swing high point/below the swing low point?). In case a steep slope trendline, that price level will be too high/low compare with break out price.

Scarlet

Hi Scarlet,

We don't need to wait till the last candle (4:00am EST) is closed in our 5 candle range. If swings High and/or Low appear earlier, we happily draw trend lines and ready to trade breakouts before all 5 candles are in place.

Regards,
Edward

Hi Edward,

Thank you for this nice system, I made a back test so far 3months with GU, result 85% win rate.

I have a question: Do we need to wait after 4EST candle close to enter a trade or we could enter if we already have a swing high/low and a valid trendline? (This case today on EU, we had a swing high at 2est candle and a down trendline, then the 4est candle broke that trendline and gave a good trade)

Scarlet

Hi Dean,

It matters to certain point. (While Highest High and Lowest Low for the day are most of the time the same, the Close value will vary, shifting pivot levels few pips up and down. On the other hand, such shifts can often be insignificant.)
Ideally you want your pivots be calculated based on Eastern Time.
I don't think you can change time frame settings in MetaTrader though...

Regards,
Edward

HI Edward -

My metatrader charts are set up at my local time in South Africa - GMT +2. That means my pivot lines are calculated according to my local pev day's stats. Sould I change the chart time settings or doesn't it matter?
Thanks
Dean SA

:) may be, may be not.
Shorting again after a retracement while in a downtrend — you can certainly do so.
It would just be another addition to the original rules.
Good luck and happy trading!
Edward

Hi Edward,

I would like your opinion, If the trend is up or down, and one looks for the break of the trendline in the current trend, could one not also look for a third touch resistance and short there too? In your main chart on this strategy, had it been in a down trend, that could of been a retracement, looking for short trades, at 12 and 13h00 the pair tested trendline on both occasions. Maybe im just trying to be gready!

Hi Roshan,

1. The strategy uses immediate entry, right on the breakout, without waiting for the breakout candle to close. Thus, when I say that we set orders 5-10 pips away from the trend line, I mean that we simply use a visual aid as we look at the trend line. We measure the distance of 5-10 pips from the trend line itself. Is it an approximate distance? Yes. I also try to avoid round numbers ending with 00, 10, 20 etc.

2. I don't use any additional indicators for confirmation.
What would I suggest? I'm afraid I I have no suggestions this time, simply because with any indicator we need to wait for a candle to close before indicator value is fixed and valid. This breakout strategy don't have the time to spare.

What traders may find rational is taking only trend following trades. Then, one may use any trend indicator, for example, 200 SMA or similar, or Parabolic SAR, or align trades with price closing above/below the Pivot point Level.

Regards,
Edward

Hi Edward, I have two questions regarding the entry in this strategy.

1. I read somewhere in this tread that we should allow 5-10 pips above/below the trendline before we consider the breakout to be valid. Does this 5-10 pips refer to the high/low of the violating candle? i.o.w. the live current price could have retraced a bit and this would still be a valid break.

2. What indicator do you use as CONFIRMATION of the breakout, if any? If not, based on your experience and logic of the strategy, what indicator would you suggest ?

Thank again Edward

Roshan

Hi Roshan,

Yes, you have the point. The earlier the breakout the more consistency is expected.
If price didn't have strength to break out for, say, 6-7 hours, it often keeps running without enthusiasm after the breakout.

Regards,
Edward

Hi Edward, I understand the rationale of the pivot levels and timing that this strategy is based on.

Does this strategy loose its efficacy as we move away from the working range ? In other words, would a breakout earlier on in the day be more prone to success than a breakout later on in the day. I do know that all positions must be closed by NY close.

Thanks Edward

Roshan Naidu

Hi Roshan,

As I started replying on your first question I've noticed the second one.
And yes, you are absolutely right! The reason we didn't pick those swings is because they do not allow us to draw valid up and down trend lines.

Your definition of valid trend lines is 100% right!
Happy trading!

Regards,
Edward