Forex trading strategy #7 (Simple breakout System)

Hi Anthony,

There are no silly questions. Not asking questions when they should be asked is...
This strategy is solely for 1 hour trading because it relies on the certain hours - opening of the London session.
Even if you are in Sydney, this particular strategy should not be altered, means if you want to use it, you have to trade the exact hours mentioned there.

These type of strategies which rely on certain time periods were "designed" to be traded during the exact suggested periods. So, trades that are "lucky" to be in front of their monitors during those hours - trade it, others move on. My advice, don't distress yourself with Forex, always have good sleep, move on if this timing does not fit in your daily schedule.

Here are the answers to your questions:
"Watch for the whole 5 min candle to close "outside the tunnel" -- I assume top horizontal line and we go long?"
- Right. Here on the picture above it is the top horizontal line.

"We are aiming at at least 20 pips profit" - what if the price move back inside the tunnel? or move against our assumption above.
- if the price moves back in the tunnel, I do nothing and wait for either my stop to be hit or my profit target of 20 pips to be reached.

"or simply exit within the three consecutive hourly candles" -- do you mean we wait till 3 hours?
- Yes, exactly, after the entry wait 3 hours and then exit. It is quite simple and works great!

Happy learning and trading!
Edward.

Hello Dr.Ashraf,
In case you were born in Sudan and went to Donetsk Medical University(1989-1997),we were classmates.Iman(My sincere to everybody apology for using this page for purposes for which it wasn't meant to be).

Hi Edward,

I'm new with Forex. Pardon me if my questions sound silly.

does this strategy only work for short-term trading (1 hour frame)?

if no, should we adjust the tunnel or use it for one day trading?

btw, I'm on the other side of the world, in sydney, how I can apply this strategy? what pair currency should I trade?

I can chase the first 2 hours of Europe and US market (before I get sleepy). Any adive welcome.

I'm not sure about some points in your strategy. please see below.

watch for the whole 5 min candle to close "outside the tunnel" -- I assume top horizontal line and we go long?

"We are aiming at at least 20 pips profit" - what if the price move back inside the tunnel? or move against our assumption above.

"or simply exit within the three consecutive hourly candles" -- do you mean we wait till 3 hours?

it's a great website!

TIA
anthony

Dr.Ashraf,
Nice to hear from you again. Sure, try using 8-9 candle.
As about news, I must say that if you really know fundamentals well and can interpret and use the news for trading, then of course your trading should have a more advanced edge.

But if you look at an economic calendar just to find out about existence of any news for a current day, and you cannot tell what reaction the market will have and, more importantly, which way it will most likely go after the news release, then I would suggest not taking news into consideration at all. Just make sure you have your stops in place and if your trading position was wrong, you will be stopped, that's it; and, of course, rewarded generously if the news push the market in your favor.
If you ask me, I don't use news, because I'm not that good at fundamental analysis.

Best regards,
Edward.

Dear Ed

So, it is 8-9 candle my time..!!!
I got 10 winning trades with 9-10 candle but now I got 4 loosing trades this week..
It seems that I would convert to 8-9 candle as you adviced me...

What about news...Could we use this strategy in acse of powerful news?

Thanks.
Dr.Ashraf

Prince1972,

Oanda trading platform http://www.oanda.com/ allows me to use 1.5 deviation settings for Bollinger Band.

... The strategy is old, the idea of adding Bollinger band was found couple of days ago... I'm with Oanda for several years.

Best regards,
Edward.

Dr.Ashraf,

I use EST time. Actually, London now also has DST time (GMT + 1 hour), so you will still have the same 8 am candle. There might only be difference in hours when countries start switching from daylight to standard time as each territory has its own month and day to do that.

I would suggest using Forex market hours tool at http://www.forexmarkethours.com/ to make sure you are looking at the candle that represents the hour before London open.

Regards,
Edward.

Dear Edward
me too like Dr.Ashraf the The deviation does not accept 1.5 value. may
i ask what chart or trading platform do you use wiht this strategy ?

and how for how long did you try it?

Thanks alot
Prince1972

Dear Edward

Another 2 questions:
My local time in Egypt now is (GMT+3) due to (DST) so, according to GMT time our candle is 9 am but according to EST time (EST+7) it is 8 am candle...What candle should i consider?

If there are important news specially for the pound, do you advice not to trade that day?

Thanks for your concern.
Dr.Ashraf

Dear Dr.Ashraf,

The deviation is exactly 1.5. May be your trading platform has limitations on that.

...If you don't follow the 5 minute chart rule, then it is already another system, which uses Bollinger band to trade breakouts. If I were using an additional indicator for this system, in our case it is Bollinger band, I would combine it with 5 minute chart rules and trade only when both agree on a signal and direction.

Speaking about a Stop loss. As long as you are comfortable with widening the stop loss it is absolutely ok to try it out. I never did it, I don't know if this would solve the problem of being stopped out. Keep us updated on the results of your trading with this or any other system.

Thank you.
Edward.

Dear Edward,

Concerning the Bollingar Band settings,I made it like this:
Period:10,Shift:0,Deviation:1.5 but deviation wasn't accepted&turned to 1.Please clarify your settings again.

What if the bollingar band doesn't agree with the trend of the 5m. frame,do you advise me to follow the bollingar or stop trading that day?

On yesterday's trade which was short the price touched the stoploss then got down to the target aftewards,accordingly,what do u think if we widen the stoploss by adding the spread?

Thanks a lot,
Dr.Ashraf

Dear Dr.Ashraf,

When the distance between the tunnel bounds is wide, use 20 pips stop. I worked the numbers again and those 20 pips are just enough to keep you from being stopped out.
When the tunnel is narrow, risks are small too. There shouldn't be any problem with taking a loss of 10 or 12 pips.

Indicators... I came up with an idea this morning (please test it before trusting it), and it is to use Bollinger Band with settings 10, 1.5 on hourly charts.
I would be then bias towards trading south or north depending on the place where the 1 am EST candle has closed:

If it closed outside the Bollinger Band - the price must move inside the band and so I will be anticipating breakouts only in that one direction.

If the candle closed inside the band and the band is narrow, the price should break outside the band: closing in the upper channel of the Bollinger Band would make me bias towards continuing north, closing in the lower channel - south.

If the candle closed inside the band and the band is wide, which means high volatility (usually then 1 am candle closes somewhere near the top or bottom of the Bollinger band). Then I would take trades towards the middle of the Bollinger Band.

Using this indicator may help you to choose a trading direction for the day. Combine it with the entry rules on 5 minutes charts and if both Bollinger band and 5 min chart candle "agree" on the breakout direction you've got a confirmed entry.
(Indicator settings were calculated for GBP/USD pair)

Good luck!
Edward.

Dear Edward
Thanks for your reply...I want to ask you about your suggestions regarding using any filter or a an indicator to detect the loosing trades...When I made a backtest , I discovered that when the distance between the 2 limbs of the channel is wide and there is no news in that day, it usually loose!!!...What do you think and what is your suggestion?

Dr.Ashraf

Your trading success is exactly what we aimed for with our project!
Thank you for your feedback.

I personally traded each and every method and system here. Opening of US market definitely provides additional trading opportunity. I would focus on 12am GMT candle itself. Take the highest high and the lowest low of the 12am GMT candle as it closes and again once 5 minute chart confirms the breakout - enter the trade.

Happy trading!
Edward.

Hi Edward
I had 10 continous wining trades since I got live, I think this method is a good one and it is completely different than hans-123...
Could we use this mehod at opening of USA market, to look at the period from 11-12 am GMT...Do you have any experience at this period?