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Breakout Strategy

Discussion in 'Commercial Trade Journals' started by tradingforex24, Dec 28, 2010.

  1. tradingforex24

    tradingforex24 Recruit

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    This is a BREAKOUT STRATEGY for the GBP/USD and USD/JPY currency pairs.

    It is true that trading a BREAKOUT STRATEGY can be a gold mine. In the financial markets, nothing works better than breakouts because every big move starts as a breakout from consolidation. The problem is that many traders chase the market blindly without any proven strategy. They get into a trade without knowing where to get out. They don't have a plan that includes where to place profit target and stop loss orders. Some traders get out too early from a winning trade because they do not follow a given system. Without a specific strategy to follow, a trader is likely to succumb to his emotions and get out of the trade. Sometimes traders don't use stop loss and they expose their trades to unlimited loss potential. This is why they are predetermined to fail.

    Another very important important factor is the false breakout phenomenon. When price breaks out of a period of consolidation or a significant high/low, traders get into the trade. But more often than not, the market quickly reverses back. This is a false breakout.

    The BREAKOUT STRATEGY relies on choppy movement in the Forex pairs GBP/USD and USD/JPY during the Asian session. After the European Market open, the market reacts more quickly and there is a high probability that price will breakout from consolidation. What is important here as well is the fundamental concept, that the price moves much further during the day. Because the night range is most often just a small fragment of the daily range, there is a high probability that price will break from consolidation and it will hit at least one of the targets placed close to the consolidation area. Of course there is a small chance that price will stay in a small range all day long. However, usually news events are moving the market and price makes new highs or lows during the day. Finally, the market moves in one main direction.

    My goal is to profit from the short-term trend in a single day.

    The BREAKOUT STRATEGY is based on the fact that price is forming a consolidation from time to time because of slower movement.

    The BREAKOUT STRATEGY is not a Holy Grail working 100%, but the odds will work for me. And that is what successful trading is all about; having the odds working in my favour!

    I trade all breakouts and that's my unique way. Most traders trying to filter false breakouts or they give up and stop trading after a false breakout. Actually, nobody can predict the market.

    Every morning when all the trading conditions for the BREAKOUT STRATEGY are met, then I place at 09:00 London Time one buy stop and one sell stop order for the currency pair GBP/USD and at 11:00 London Time I do the same for the currency pair USD/JPY.

    The pending orders are valid for the GBP/USD until next day 08:30 and for the USD/JPY until next day 10:30 London Time.

    The distance between the upper target and stop loss is equal to the range. The same holds for the lower target. Since the daily range will overrun the night range, in most of the time at least one of my targets will be reached. If one target is missed, the market change direction and profit on the other side to recover the loss. But some days can happen I loss on both trades.

    When one order is filled, both the profit and stop loss will become active.

    If the stop loss is hit, then the other order is filled
    If the profit target is hit, I cancel the other pending order

    Sometimes I will change my opinion during the trade and I close the trade before hit stop loss or take profit. It will usually happen if the market isn't developing as I expected and the charts show me that the trade lost its power.

    Now I have divided all possible situations into four classes.

    Class I: One true breakout | Full Profit
    Class II: One false and one true breakout | Ending up at break even
    Class III: One false breakout | I lost. Since the position was opened to long. The second order was canceled and not filled.
    Class IV: Two false breakouts | The worst case scenario. I lost both trades per day.

    I have determined the occurrence of every scenario over the past 4 years.

    Please see attachment below!

    Money Management​


    This is the most important aspect to any trading system. It is also the most underutilized. Every trading system will have its bad days. No system can win every day. If anyone tells you differently, they are a liar! Good systems win over time…with proper money management. Even the best system on earth is doomed if you don’t plug money management into your plan of attack.

    Money management will will keep you to a strict trading discipline. Money management answers the most important question: “How much?” (Position size) This how much question is often overlooked. Proper money management will keep your risk/reward ratios in tune. These are the key components to trading success.

    I start trading off with risk of 1% of my total capital on any opening trade.

    Here you can see my statement: http://www.mt4i.com/users/fxtc02

    To sign up for the strategy just go:

    http://www.rentasignal.com/de/signal/view/32491

    http://www.gfsignals.com/forex-trading-strategy/ForexInvestI

    https://www.zulutrade.com/TradeHistoryIndividual.aspx?pid=27432

    http://www.zipsignals.com/zsResults.swf?client_id=100934




    To your success!
    Uwe
     

    Attached Files:

  2. tradingforex24

    tradingforex24 Recruit

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    The BREAKOUT STRATEGY is normal trading system, it is not a holy grail that is profitable 100% times. We need to be prepared that there will be 1, 2 or even 3 losing months every year. As long as the rest of the months are profitable, it is still a lot of edge to make money on.
    A psychological help for people who have problem coping with losses – I think about my losses not as the money I lost, but as money I lend to the market. It has to return back to me, and much more.

    December was the first month with a loss of 160 pips. Witch represents 3,3% loss of the account (providing we risk 1% per trade).

    But the overall profit is 20%. http://www.mt4i.com/users/fxtc02/stats

    The BREAKOUT STRATEGY is normal trading system, it is not a holy grail that is profitable 100% times. We need to be prepared that there will be 1, 2 or even 3 losing months every year. As long as the rest of the months are profitable, it is still a lot of edge to make money on.

    A psychological help for people who have problem coping with losses –
    I think about my losses not as the money I lost, but as money
    I lend to the market. It has to return back to me, and much more.
    :)
     

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