Forex trading strategy #7 (Simple breakout System)

It should work for EUR/USD pair as well, but will usually produce less pips.

Edward.

Can this strategy be used for EUR/USD too?

Thanks

Hi Hanz,
I never calculated the amount of pips in a channel. I use visual reference only.

Regards,
Edward.

Hi ed,
what is the range for the channel so we can say it narrow and how any pips to say it is wide?
Regards,
Hanz

Thanks Ed for taking time to touch all my questions. I'll post results of all my observations. Now that my account has been activated, I'll be using my username i.e Nuelkadz.

Keep the good work up.

Emmanuel

Hi Emmanuel,

Sure, anything that can improve the system is acceptable. Just keep testing to learn how good it performs over the time.

Trading breakouts during the news is not a bad thing. I believe that news shouldn't scare traders as much as they actually do :). News aren't always bad for your trading, they can easily be on your side and help the profits grow. Knowing when the most important news releases are due is a must and is a good trading habit for any serious Forex trader.

Reagarding newbie market fears, that's a huge topic to cover. In short I would say:
1. If you own a Forex system but have no confidence in it, you are bound to have a fear of failure. Advice - develop a system you can trust 100%.
2. If you trade with money that you cannot allow to lose, you will have even bigger fear of losing your investment. Advice - open a mini trading account and put as much money as you can afford to lose without any second thought. If you don't have such money, simply don't trade Forex.
3. If you trade because you need a lot of money and/or your goal is to make them as soon as possible, you will be scared each time the market moves against your position and thus make numerous mistakes while trading. Advice - trade slow as if you don't need money, take only those decisions that you had time to think over.

As about hedging. It is again a huge topic. I wouldn't be able to cover it here right now. We probably need a new hedging strategy posted in order to open such topic there. Sorry... Hedging in Forex is quite interesting, however, it requires a lot of attention to be paid, and sometimes for a new trader it only sets additional challenges if he/she decides to combine hedging strategy with another trading system.

Thank you for all your questions,
Kind regards,
Edward.

Hi Magnus,

Spread betting and Forex trading both are high risk investments. To make your own decision you simply have to try them out. The only advice here would be to set the right goal, which is "to Test, not to Win" by using the smallest investment possible.

Regards,
Edward.

Ed

Thanks for the BB tips. Your strategy worked fine this morning with gbp/usd. I also observed that early signal from a 4H pinbar is helpful to determine the strength of the breakout. Is this acceptable?

Is trading with this breakout during news advisable or you simply backout during news period?

As a newbie, i still have my fears especially of price not obeying my strategy. Do you have any suggestion on newbies's market fears?

Some suggest hedging. Do you subscribe to hedging as a strategy to keep you going in the market until you are comfortable trading your system?

Does hedging have any negative impact on your money management?

If hedging is accepatable, can you please advice on proper and effective hedging strategies?

Emmanuel

Edward thanks for all advice that newbies like me can have very good use for.
Can you tell me if I should go for spread betting or a real forex trading account?

Thanks,
Magnus in Sweden

Hi Emmanuel,

Market volatility can be measured, for instance, by using Bollinger Band indicator. Narrow Bollinger bands reflect low volatility in the market, while wide bands indicate high volatility or spikes in volatility.

Also knowing about Forex market hours and most active trading sessions you can expect the market to be active or quiet. I would suggest http://forexmarkethours.com/ to learn more about this topic.

Regarding Bollinger Band idea mentioned above here is a screen shot.

The idea is to get direction bias using 1 hour chart and then trade channel breakouts on 5 min chart in that direction only.

Hope this helps,
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

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.

|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,

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.

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