Advanced forex trading strategy – the early bird breakout system

Having a good trading system means more money being generated. Traders have found it very difficult to maintain a particular trading system due to the fact that there are several factors that cause the system to become obsolete and this is one of the main reasons that new strategies have to be developed each and every time. 

 Having a good trading strategy does not mean that you should be over confident when trading. Basing your trading system with related strategies such as trading news, Fibonacci analysis, determining your stop loss and risk management will help your trading system to be solid. 

 In this section we will look at one of the advanced trading strategy that is very profitable. As the name says Early Bird Breakout System means that you should do your trade very early morning so as to observe a significant breakout. This advanced system requires traders to commence their trades as early as possible e.g. 5:00 am (EST). 

 The Early Bird Breakout System is a morning strategy which bases on time factor, two currency pairs and does not make use of indicators. The currencies we would prefer you make use of with this system is the GBP/USD and the EUR/USD. 

 Trading rules:

 This is one of the most interesting breakout system due to the fact that it is very easy to setup and does not make use of indicators. With this system you would have to find the lowest low and highest low of the candles from the previous period/time between 00:00 to 4.59 am (EST). Therefore, you should make use of five candles in order to set this system i.e hourly candle: 0, 1, 2, 3 and 4. 

 At exactly 5:00 am (EST) you would have to make 2 entry orders. A buy order at which it should be above the highest high +4 pips and then your sell order should be below the lowest low -4 pips. 

 The next step would be for you to set your initial profit targets. Your profit targets for the EUR/USD can be set to +90 pips and for the GBP/USD set to +140 pips, these targets would be very high given that the average daily range for EUR/USD is at 110-120 pips and the GBP/USD is at 180-200 pips. 

 Hence, if the profit targets become successful then that would be great. Therefore, your profits would not be determined by the fixed amount of pips but rather by the time factor. You are able to closes all the positions at approximately 1:00 pm EST then you would have to continue the next day. To our observation we would also state that time is also an important factor which plays a pivotal role in forex trading. 

 Sideways Consolidation 

 This is when the price just moves in a range. In small time periods, the price will bump up and down happily but never seem to get out of this range. When the range is reached and instead of the price moving back it actually takes two steps forwards instead, then you have a breakout and usually a dramatic price change will result. 

 We highly recommend trying to get in early on the action and placing a very tight stop just in case you are wrong on this occasion. This way you will be best prepared to take advantage of upside whilst minimizing your risks to the downside. 

 Triangles 

 Triangles are very similar to sideways consolidations. The only difference is that the price appears to converge. Instead of two parallel lines showing the limits of the range, you'll have a triangle and it will look like the oscillations are getting tighter. 

 Of course, the price will never reach the tip of the triangle and become constant so the great thing about a triangle is that it usually spells an inevitable breakout! 

 Flags 

 Picture a price that is trending down. Now imagine that it traces back briefly. It might be a reversal or it could only be a temporary blip. 

 If it is only a temporary blip, then you know that when it starts to downtrend again, it will do it with violence and catch out those who guessed wrong. This is a flag. It's called a flag because if you take two parallel lines to denote the range of the temporary false-reversal then it looks like a flag. 

 Setting Stop Loss orders: 

 Setting your stop loss is very important when making use of this trading system. You should make it a point that you setup your own stop loss although it is set automatically in your account. The stop loss for your sell order should be placed above the highest high at +3 pips and stop loss for buy order should be placed below the lowest low found early placing it at -3 pips. The stop loss should never be moved due to the fact that if a stop loss is hit you will observe a positive open position in the opposite.

 This trading system should take you at least an hour to have it setup and commence your trade early morning. This system would be very profitable to many traders if we make use of the major pairs. 

 We will now look at another alternative basing on time factor. You can trade on the following pairs the GBP/USD and EUR/USD at approximately 7:00 am GMT and this time you would not have to look at the previous 5 hourly candles rather you will only look at the previous candle that occurred at 6:00 am GMT. The Setup would be as follows: 

 Long position entry = close price of 6:00 candle + 5 pips
 Short position entry = close price of 6:00 - 5 pips
 Stop loss = 10 pips away from the close of 6:00 

 Obtain partial profits at approx. 9:00 am GMT and if the market does not make a significant movement up until 11:00 am GMT close all positions at approximately 16:00 GMT.