Advanced system #5 (Trend Lines Breakout System)

Hi Edward, I have been mulling over the question I asked above.

If the following is correct then I see the flaw in my logic.

1. A downtrend trendline (connecting two swing high points) must be either horizontal to the X-axis or point downwards.
2. An uptrend trendline (connecting two swing low points) must be either horizontal to the X-axis or point upwards.

Is this correct ?

Thanks again

Hi Edward, in your example - the initial post.

Why did you not choose the second or fourth candle, before midnight, as the valid swing high ? In both these cases they have lower highs on either side of them; this would then make them valid swing highs!

maybe I am confused so cannot see my fault in logic. please help.

thanks

Roshan

Hi Lino,

Absolutely, if your risk tolerance allows and market favors it, you may use support/resistance lines for setting trading stops.

Regarding EMAs and ADX, as far as understood, you use them to identify trend strength and look for realistic profit targets which is good; I wouldn't use any additional indicators to time entries though, which I think you never meant to do.

I hope you enjoy trading with one of my favorite Forex strategies!

Regards,
Edward

Hi Edward.
Thanks for your site. My name is Lino, im from South Africa. Iv done some demo and live trading. Iv also done an advanced trading course from my brokerage company. Your Breakout system works very well, the times work well for me too, as im GTM+2. What i wanted to ask is, can one use the support and resistance lines as stops, as iv seen on a few occasions by placing the stop just above the candle that broke the line, the pair has pulled back to test the high of that candle. Once the trade is in and going the direction intended, then i lower the stop. Another thing, i also use the 10, 20 and 40 EMA, as double confirmation with a ADX above 30 so that if trending well one can wait to reach pivot target. Your opinion would be most welcome.

Hi Andy,

At the beginnig like any other trader I had my big moments of success and failure. I had periods of excitement changing by moments of total frustration.
The three main components which helped me to find my way out were:
- trading tiny positions
- for a long period of time
- while looking for the perfect trading tools with signals that make sense to me and comply with my understanding of market rules, trends and behaviour.
...And if your trading analysis explains balance between support/resistance forces in the market and, more importantly, enables you to project this support/resistance areas in the future, you are doing it right!

I felt that things are moving my way when I clearly saw that every aspect of my daily market analysis make sense as every new trading session unfolds.

Finally, every month or year when you summarize the performance, you see the results for yourself.
If your results look next way:
- periods of huge sell offs and or rallies => win
- slow steady trending market => win
- extended time ranging market, no trend => small win or or break even
- rocky ride, crisis related whipsaws, other unexpected market turns => break even or small to moderate loss,

you know you are trading it right, no matter if a new trade today is a winner or a loser.

Regards,
Edward

Hey Edward,

Kinda off the wall question. Just by looking at all the strategies its evident to see that they took time and a lot of studying the market to construct, therefore one would assume that you are an experienced fx trader and I am looking for insight from someone who is just that! I am 20 and have been trading forex for about 8 months now. I started out with beginners luck, which of course then turned into losses. I stopped, then started again about 3 months ago. It feels different now because i have a good idea of how the market works (at least i think). Although I am still trading in my demo account I can see that most of my trades go right, and the ones which don't and I get stoped out at still go the away I planned after my stop loss triggers (this always happens till i get to real money). So my question to you is- If you can think back, what kinda feeling did you have right before you started to make money at a steady pace without much worry. Basically (in the beggining before you started making money) how did you know that your analysis of the market was actually legit and not just based on false hopes and lucky trades?

Any help is greatly appreciated and happy trading!

Andi
AndiKola11[at]yahoo.com

Yes Jaycee,
That's right. If there are no valid swings within 5 candle range, there is nothing for us to base our trade upon - we stay out or switch to another trading system if available.

Regards,
Edward

hi Mr Edward,
Thank you very much for your explanation and i think i have understand this system well but i have one more question, if within those 5 candles, we cant find any valid swing low and swing high....Is it means that no trade for that day?

Jaycee

Hi Jaycee,
A protective stop is placed just above/bellow the candle that broke through the trend line. Add 5-7 pips on top of that and you'll be fine.

Regards,
Edward

HI Mr Edward,
i have successfully use your system to earn some pips ^_^.... Somehow from what i have seen that after the candle break through the trend line closed,the next candle did a sharp pull back to the trend line that actually make me feel that i have entered a wrong direction, but dramatically the following candle reverse and straight shoot towards to my profit target..... I learned a lesson that set a good stop loss point is very important, so i want to ask that how many pips away from the bottom/top of the breakthrough candle should i set the stop loss point.

Thank you very much

Jaycee..

Yes, that you are right.

Happy trading!
Edward

HI Mr Edward,
thank you very much for your explanation ....Sorry for disturbing one more time, as you said that by the end of New York session (by 5:00 pm EST) no breakouts were seen, cancel all pending orders for the day. Then from the chart i given to you the uptrend line is broken at 8th candle, so is that the point for us to start entry sell? Then after that we trade for three candle.....Am i right???

Hi Jaycee,

Your calculations are correct.
Simply keep trading.

Best regards,
Edward

HI Mr Edward,
Just want to double confirm something.......i am here at GMT+8 Singapore.Kuala Lumpur and according to my calculation EST 00:00 is equal to my local time 12:00pm.
But i dont know whether my calculation wrong or not because since i have try your strategies for 2 days already but still not getting any good result.......

Thanks....

Jaycee

Hi Jaycee,

Here is the screen shot with explanations:

click to see full size image

Now, regarding your second question.
Once we have trend lines in place (both or just one) we wait for as long as it takes for the market to break out of those trend lines. It is not necessarily going to be the 6th or 7th or any other candle.
Once got a breakout in place, we trade for 3 next hours as planned.

If, however, by the end of New York session (by 5:00 pm EST) no breakouts were seen, cancel all pending orders for the day.

Regards,
Edward