Forex trading strategy #7 (Simple breakout System)

Hi Suds,

you should convert your platform hours to GMT and trade with GMT hours.

7am GMT = 9am candle on your platform.

Best regards,
Edward

Hi Edward,
My MT4 is in GMT+2 timing, so should i watch 6-7 GMT candle or gmt+2 candle.
Thanks
Suds

Forex strategies revealed.. OMG! :)

Clearly explained. I do something similar already and it works well.
Dean

Hi Anthony,

GBP/USD
1. 6am to 7am GMT and apply 2 horizontal trend lines to create a channel:
- first trend line will go through the highest wick of the 6am to 7 am range.
- second trend line will go through the lowest wick of the 6am to 7 am range.
2. Go to a 5minute chart. Correct.
3. We wait for the 5 min candle to break out of the range. It doesn't have to be at 8am or any other specific time. It can happen at any time.
A signal to enter comes when the 5 min trades fully outside the channel, means that the full candle body + wicks have been trading outside the channel (6am to 7 am price range). Any preceding candles that attempted to break out of the channel, but touched the channel or partially traded inside the channel, should be ignored.
4. A breakout can occur at any time, as well as after 8am.
5. Profit target at least 20 pips.

Best regards,
Edward

hi edward
this is a brilliant site

I wish you could really breakdown this system even in more simpler terms.
I hope you don't mind

GBP/USD
1. 6am to 7am GMT and apply trend line from highest wick to lowest wick
2. go to a 5minute chart....
3. if the 8am /5minute next candle breaks out of the channel: DO WE FOLLOW THAT 'TREND' AND ENTER A TRADE on the next candle?

4. if the candle at 8am5 minute does not break.... do we wait until a another 5 minute candle does or is this strtegy over?

i am only looking for about 5 pips a trade

thanking you in anticipation

mr Anthony Rich

Hi Reza,

Experienced traders are able to recognize such price moves/candles, and while everyone rushes on a departing train, they will wait for the price to retrace and then get comfortably on board. Yes, Fibonacci is the best tool for that.

That's called a "next level trading", where with experience you tend to trade more conservatively because your experience tells you what to expect from the market.

(The risk of missing a train in this case is always less than the risk of being crashed by a train... The rule of conservative trading.)

Best regards,
Edward

Dear Edward
I think when the last candle which comes out of the chanel has a long body and closes far from borders, itis better to use fibo retracement for that. If price retraces and moves in the same direction we enter, otherwise we wait for another signal maybe in other direction. I did not test this idea yet. Please let me know your suggestion.

Regards
Reza

Hi Karl,

that's a lot of questions to process... But I'll try to answer as many as I can.

If to compare Advanced #5 and Simple #7, let's just say that majority of breakout systems are very similar to each other. Adding the fact that both breakouts are expected to happen during the first early hours, we have 2 methods to work with.

There are times when either method can't be used:
Advanced #5 - trend lines doesn't always take place.
Simple #7 - the 1-2 am price range/channel could be too wide to trade comfortably.

There will be times when a breakout signal will be triggered for both systems at approx. the same time (usually when we have trend lines for Advanced #5 set before 2 am).

So, speaking of mixing systems on purpose - I wouldn't; instead I'd recommend trading each system separately; but, if the signals arrive simultaneously - that's obviously a good trading opportunity to take.

Now, when you try to apply the rules to hours other than suggested in the original rules, it modifies the conditions, which is not bad, but it doesn't allow to project & analyse the outcome for the breakouts you've highlighted on the screenshots.

Using Stochastic oversold/bought signals is a good way to confirm the strength and profit potentials of the breakout. E.g. as you've mentioned, a breakout to the upside with Stochastic reading/crossing in the oversold area - this set up doesn't have high profit hopes. On the contrary, the same breakout to the upside with Stochastic crossing/exiting from the oversold area - suggests a good chance to make good profits ahead.

I've reviewed your charts, basically what we see is trend line based trading (regardless the type of the lines - they can be horisontal (Support/Resistance) or under any angle).
This type of trading, especially with small time frames (5, 15 min) requires additional analysis & indicators - this is where I completely agree with you about the use of Stochastic, MACD divergence, Moving averages, which should improve the quality of filtering best possible breakout opportunities.
The way you're currently trading is certainly not the same approach/system as original Simple #7, but rather a totally new method, with the concept of trend line breakout in mind.
At this stage, such system is still too raw to analyse, you'll need to do some further work, especially on creating specific rules for distinguishing weak breakouts from strong ones, making rules for placing stops and projecting profits, clearly identifying the role for each indicator used on the charts.
I think this is a good system to spend time on.

I hope I was able to target your questions.

Kind regards,
Edward

P.S. I'm very sorry for the delay, it happened that I wasn't able to dedicate much time to comments in August.

hi Edward Revy
was wondering what you thought about the chart pics its something i havnt tested properly but think it could work and gonna test it. Also was wondering if you have anything ideas to help with timing in macd divergence
thanks looking forward to hearing from you

karl

hi ed
i was wondering if you had any other recommendation on good day trading systems as this is just one i would use on these times.

Also i find macd devergence great but some times it can be a while before it turns and you can get good moves up before it turns down any tips on getting better idea of when it may turn down.
I just seen this site so hope im not being too annoying lol
I was also using the london 8am open with td trend line to get the early morning pips but on a 15 mins time frame was ok had some good days but i prefer the Trend Lines Breakout System. think its just abit better than what i had already discovered

thanks again karl

this is a pic of the gbp/usd chart that didnt work out earlier

also tried the 12 noon set up on eur usd as well as the gbp/jpy. I find gbp/jpy and gbp/usd very closley correlated in the 1 hour time frame so you see pretty much the same thin in that aswell. heres i pic of that.

there is also a down divergence on macd got to be aware of it. if you used just the lines it would be a 5 min break out but stocastics over bought, histogram losing down momentum and the candles are bottoming out. As you could see it did have a turn at the top as everything said but if you had got in earlier could of made a profit. at 20 pips or broke even moving stop up or like me i just left it around the R2 level but i wanted to see if it would continue back up further.

this is just a test a have done today and was wondering your oppinion on it. I has not been tested or provent to be accurate over a period of time. also the trend line break outs would be valid i guess and normally i use 15 min chart to place my trade on so this 5 mins stuff is also new to me.
thanks karl

hi every1 another thing i noticed was ed mentioned you could probably do this for 1 pm london time using the 12 noon candle i tried this also and made a bit of profits on gbp/jpy but noticed i would have had a better entry if i had used th td trend lines as you can see. I had good feeling as was looking for a bounce back of pivot level and stocastics were oversold and macd both were about to turn up. Checked this also in 15 min time frame and were similar so with a combination i think it personally give me a clear picture. I couldnt get into this trade if i traded it on 15 mins chart because there was no down trade line as in 5 mins chart. I shall upload a picture and so maybe you can understand it a bit better.
Ed would like your oppinion on what you think about it

thanks karl

hi ed and all
what would you say if the 5 min entry occured but on the 5 mins chart stocastics where in over bought area and it broke to the up side this would show at least for the short term it may be a false break out as not much momentum here. Would you think of maybe waiting for it to retrace back into the channel and wait for another break out this has happen to me before there where to big up candles but didnt start outside the channel line so waited next candle did. I enter as this candle shot up but finished like a hammer candle(not sure with names of candles look to reverse) then it went back down and took out my stop nicely. Also there was down divergence in macd 5 mins chart and it later time frames too.
heres the chart let me know what you think and if i did anything wrong

hi Ed and all
i think this site great. but got a quick question about Advanced system #5 and 7 Simple breakout System they seem to be very similar apart from the simple one focuses on one hour break out and advance 7 of the trend line. But its around the same time so my question is the simple one slightly better as it has quicker entries or is is prone to have more losses as and may not be as reliable as the trend break out because it simple takes in more information in calulating its line.

Also how would thing play out if you were to combine the 2 on good days a would guess it would give a buy signal on both and get good profits. But say u get a but signal on the first one u make 20 pips and then goes through the trend line system to the down side. I think i could work to both side but not sure was wondering others oppinion.

and just generally how these two would work together maybe you could add to your position after the break of the trend lines. This is all assuming the trend line break would be futher away the the break of the 7:05 am break
looking forward to hearing your oppinions i am new and was really wondering which one to use

I had a quick look at them they seem to show very similar lines for the break out so guess they just confirm each other but on days where there isnt no up or down trend line i guess you could use this break out stratergy.

thank karl