Yet another way to trade...

[jpygbp]

Here is a possible way to trade the London session for other beginners. It is not perfect but is interesting.


Between 0:00am CST and 3:00am CST, as the London session gets underway, start looking at your 30min charts of the four major crosses (eur/$, gbp/$, $/chf, $/jpy). You will notice the DMI/ADX indicator will have a cross of the dmi+ and dmi- followed by a rise in the adx. You will also notice that the mva of your choice will cross in the same direction. The macd is based upon the mva, so it will also cross. You can also use the slo stochastic for further confirmation if you like. Throw in an RSI if you want an oscilator. look at the last major move in the market usualy in the last session. If you draw a fib over the last major move it should show you where the current consolidation is occuring. You can see the consolidation even without the fibs most of the time.
You want five or more reasons to enter the trade. Use more or less of the above indicators or a few of your own choice.

Also, you can often look at the four majors and take the direction of the majority. For example both the JPY and the CHF should be in the same direction. the EUR and GBP should be trending in the oposite direction of the JPY and CHF.

Now we wait for the trend to break out of this consolidation range that has set up over the last couple of hours. Then just trade the trend until one of the above indicators, a trailing stop or the time of day tells you the trend is over. You will not catch the entire move but that is ok.


To recap:

* consolidation occurs before the session open.
* Indicators etc will show a new trend.
* trade with the trend
* exit as needed

[jpygbp]

I have been experimenting with the opening breakout trade. To recap, I wait until just before the open of either the NY or London trading day. I then look at the big four currencies (JPY, EUR, GBP, CHF). I look at the day chart for general direction, and make sure the 30min and 5 or 10min are all in the same direction. I do this with a 5 emva and an 89 emva. Other versions of the emva are fine. Some times I will use the 5 and 20. Other people prefer the 9 & 18. Anyway, the jpy and chf will usually cross in one direction and the eur and gbp will cross the other way. I place an order for each of the above currencies as the session breakout starts. Normal days will only give about 40 pips so I try to at least catch 20 of them. If one or more of the four currencies have 20pips, then I close all four.

Here are today’s results for 8:59EST-10.26EST:
Eurusd 1.1236 1.1257 $210.
Gbpusd 1.6056 1.6059 $30
Usdjpy 118.86 118.70 $134.79
Usdchf 1.3466 1.3443 $171.09

[fairwind]

Hi JPYGBP,

Interesting post, thanks. I will study this more closely.

"...I do this with a 5 emva and an 89 emva..."

These ma's are interesting, are they in fact what you use?? The 5 I can understand but the 89?? Maybe you hit two keys instead of one.

Please advise.


Good trading to all.......................

[Skipper]

Hi JPYGBP,
I use a very similar strategy to yours. I also went the way of looking at the Daily chart for trend direction. That will give you a long term trend direction. To get the intermediate term trend direction I look at the 60 minute chart with a 20 simple moving average. When Price is above the 20 simple moving average I look to go long. And when price is below the 20 Simple moving average I look to go short. However trading on the 1 hr chart gives me the feeling of being divorced from the action so I go to either the 5 minute or the 15 minute chart. If I use the 15 minute chart I place a 70 simple moving average on the chart. If you look at a 60 minute chart with a 20 SMA and you will see that the points where the 20 SMA crosses are the same crossing points a 70 SMA will give you on a 15 minute chart. The benefit of this is: you can use a 15 minute chart with a 70 SMA giving you the same story as a 60 minute chart without having to switch time scales all the time. NOW you can look to go long above the 70 SMA and look for short trades below the 70 SMA.

NB! the 200 SMA on the 5 minute chart does the same the above. You can therefore look for more timely entries on the 5minute chart with a 200 SMA during those break-out periods.
Incidently a good way to tell direction of the break-out from the western overnight consolidation period is to use the Williams %R with 56 periods. IT will usually LEAD the way for the direction break-out. Experiment and enjoy!

[BillF]

Skipper & jpygbp,

Multiple time frames with matching SMAs - an excellent idea which looks both simple and profitable - I'll do some backtesting for myself and report back.

What would you use for your trailing S/L - the 200 SMA on the 5 min?

Thankyou both for your generousity and clarity

Bill...

[forex1]

Hi Bill

I really enjoy your postings and comments, thanks for sharing! It appears that you have the means to back-test system ideas and come up with conclusive results in no time at all – can you back-test the following breakout system idea and tell me your view in terms of potential profitability? I hope you've got some 30min history to work with!

 Currency: USDCHF
 Trade concept: Trade the first breakout of the 2:00/2:30am EST 30 min bar (7:00/7:30 am GMT)
 Entry method: Enter 2 pips above the high or below the low of the mentioned bar
 Stop loss: 25 pips (including a 5 pip spread, so net negative movement = 20 pips)
 Profit objective: 35 pips (including a 5 pip spread, so net positive movement = 40 pips)
 No trade management: The end result is either –25 or +35
 Trade every day (unless the back testing shows that some days are consistently bad). From the limited history I have it appears that the 1st breakout on a Monday is mostly fake, so maybe one should only take the 2nd breakout on a Monday? Maybe you can confirm this pattern from you historical data?

Any other interesting conclusions will be greatly appreciated! Maybe the stop loss and profit objectives are not optimal?

Thanks in advance!

[Skipper]

Hi Jpygbp,

Placed your 20 and 200 SMA's on the 5 minute chart. Then follow the 20 SMA to the left of the chart to where the last 20 SMA and "price" cut occurred. That is where your resistance (in a downtrend) or support (in an uptrend) is. If the currency fluctuates or turns, those 20 SMA & currency price areas can either be your profit target objective if the trend has turned or 5 pips further away from that point can be your stop if the currency has just fluctuated.

This is for Forex1:
The CHF/USD runs quite a distance everyday. On a good day up to 250 pips. This is of course not a straight run in one direction. Because it runs a longer distance than the other majors it usually fluctuates a greater distance than the other majors. When I look at a major breakout and I am set for a momentum run, then for CHF/USD I look at a stop of about 50-55 pips. Anything smaller will just take you out of the market. However you have to make some sort of calculation prior to entering your trade in terms of risk/reward. If the reward (potential profit target is at least 2 times your risk of 50pips then I don't short change myself.)

Good trading

[BillF]

Forex1,

Skipper has given you some excellent clues. I'm working on some of these ideas and will report back (probably late next week) as I have wonderful family coming to stay. I'll be away from my trading as a result.

Bill...