No seriously this is the key, trading against the trend is
like trying to swim
against the current, you may make some gains but eventually
it will push you
back. In the 10 Minute Breakout System you will learn how to
judge the trend to
ensure you are entering into the longer term trend at the
right moment riding
the wave to our predetermined profit target.
As I said earlier this system is an ultimate low maintenance
system which
requires only 10 minutes every evening adjusting positions
and placing orders,
this system is designed for people with very little time to
spear. It uses daily
charts and only requires end of day data for your trading
decisions. The trades
last anywhere, from 2 days to a week depending on the
strength of the trend.
Risk is always very small in comparison to the average
reward. Watching 8-10
currency pairs supplies us with plenty of trade setups so we
can take only the
very best of the bunch. Because this system is a trend
following system it stacks
the odds far more in our favour which is something I always
like.
Setting up your charts: show video via this link
http://www.10-minute-forex-wealth-builder.com/trend/trend.html
Let's begin by opening a daily chart for the
EUR/USD, this pair is renowned for
its trending periods and will make it easier for me to
explain the setups for this
system. You can either use candlestick or bar chart for this
system, I will be
using bar charts as a bar chart tends to make it easier to
spot the setup we are
looking for.
Once you have a daily chart open for your desired pair all
we need to do is add a
21 simple moving average in red. Your chart should now look
like the one below,
clean and simple.
The Trend
Currency markets are renowned for their trending
characteristics which believe it
or not make it far easier for us to make profitable trades
(more on this later).
Below in fig 1 is an example of a chart of the EUR/USD. As
you can clearly see
on the chart below this market is trending up and any smart
investor would be
looking to take long positions or wait for the market to
clearly start trending
down before taking any short positions.
Trading forex is all about placing the odds
in your favour as much as possible, so
over the long term even if you have a patch of bad luck you
will still come out
with a profit month after month.
Although finding the direction of the trend is simple, many
traders find it difficult
due to over analysing the market condition. The best piece
of advice I can give
someone with this problem is to keep things simple, I have
never met a
professional trader who has a complicated system or set of
rules which magically makes him/her money. Create a simple
set of rules and be disciplined, the
markets reward discipline with long term success.
In the 10MFWB Breakout System I utilise price action for the
entry technique, I
do not rely on indicators for entries into the market as
they lag far too much in
most circumstances, by the time the indicator has given a
signal the move will
have come and gone.
Identifying the trend
The only thing on the chart should be the red coloured line
of the 21SMA, this
will change slope and direction depending on the direction
of the trend.
Most traders I know use the moving averages
as a trigger to enter trades, from
my experience this is a waste of time, by the time the
moving average has
changed the move is either retracing or over completely. I
use moving averages
to ensure I am on the right side of the trend when I take a
trade. If the trend is
weakening I make a note but the trend is still in place
until the moving average
changes direction from up to down or down to up.
On the chart above I have marked the trend
direction with black arrows, you can
clearly see the trend direction change when the SMA
indicator changes from up
to down and down to up. The direction of the trend is the
direction all trades
must be taken during that period. For example, while the
trend is pointing up on
the 21 SMA we only take long trades (buy trades) in that
direction. While the 21
SMA is pointing down we will only be taking short positions
(sell trades).
As the trend weakens the SMA will become flat and this
indicates one of two
things, either the trend is changing or it’s a small
consolidation while the trend
regains some strength. Be very cautious about taking trades
when the 21 SMA
becomes flat I personally avoid trades totally until the 21
SMA is clearly pointing
up or down once again.
Spend a little time on your chart and try to spot the trend
and when the SMA
average becomes flat, this does not have to be an exact
science as our entry
technique will often prevent us from entering the market
against the trend. Once
you feel comfortable with the 21 SMA, move onto the next
section and we will
discuss the entry technique for entering the market.
Entries:
show video in the link bellow:
http://www.10-minute-forex-wealth-builder.com/insidebars/insidebars.html
The entry into the market is what sets apart
the winners from the losers in this
business. The migratory of traders will try and predict the
exact turning point of
a move and then open an order generally while price is still
moving against
them. I have never understood this and it possibly has
something to do with
proving they can beat the market. Whatever it is we will not
be joining in. Our
entry into the market will be after a consolidation in the
direction of the trend,
this will be our confirmation to enter the market on the
break of the signal bar.
 We
will only be using a daily chart with this system and we
will be checking the chart every evening as the daily bar
closes which requires only a few minutes of your time. Our
entry relies on an inside bar candle formation. We can not
make a trade until one is present. An inside bar is simply a
daily bar which is completely
engulfed by the previous bar. (see example to the left)
Once we have an inside bar present we will
place a pending position, 5 pips above the high of the
inside bar + spread if the trend is up on the 21 SMA
indicator and 5 pips below the inside bar + spread if the
trend is down on the 21 SMA indicator. Let's look at some
examples of entry setups.
Above is a daily chart of the EUR/USD, the
inside bars are marked in yellow, as
you can see the 21 SMA indicator is clearly indicating an up
trend so we are
looking to go long or buy this currency pair 5 pips above
the inside bar + spread.
The green lines are our entries where we would open our
positions.
Some trading platforms like mine, plot Sunday bars, these
are always very small
and are of no use to us for calculating entries and stops.
If your platform uses
these then simply ignore them and use the next available bar
for your trade
calculations. Each Sunday bar is marked in red on the above
example.
Stops:
show video in the link bellow:
http://www.10-minute-forex-wealth-builder.com/insidebarentries/insidebarentries.html
 Ok
so you have located the inside bar, it meets
the requirements and you are ready to place a
pending order above or below the inside bar by
5 pips depending on the trend direction. The
stop for this position will be a set pip value,
each currency pair has a different stop value
depending on how volatile it is. Below are the
8 main currency pairs I trade along with the
required stop value for each pair.
|
Pair |
Stop |
You should only risk 2% of your trading account on
each trade. To work out what size position to place
on any given trade please refer to the money
management. |
|
EURUSD |
50 |
|
USDCHF |
50 |
|
AUDUSD |
50 |
|
GBPUSD |
60 |
|
USDJPY |
50 |
|
USDCAD |
60 |
|
EURJPY |
90 |
|
GBPJPY |
100 |
Take Profits
Once you have placed your pending position 5 pips + spread
above/below the
inside bar with a stop of the required value as stated above
then it is time to set
the take profit level for the trade. The take profit for any
trade on any currency
pair with this system is always double the value of the
stop. This means your
reward is twice as big as your risk.
Fore example lets say we have an inside bar on the GBP/JPY
the trend is up and
we have placed our buy orders 5 pips above the top of the
inside bar. The stop
value for the GBP/JPY is 100 pips, which means the take
profit should be set at
200 pips. I use fixed take profit levels for several reasons.
First it eliminates
emotion from trading which is so common with new traders
trading with real
money on the line. Second I know from rigorous testing and
trading, not only are
these levels hit the most often but using this method of
taking profit means as
long as we achieve more than 33% winning trades we are
making money.Once you have placed your order with your
broker and placed all the required stops and take profit
levels, all that is left to do is go about your every day
life and check back tomorrow evening to see how the trade
developed. The majority of the time you will come back to
your trading platform the next evening to discover your
trade has already closed with a healthy profit.
System Rules
Before we move onto full trade examples let's run over the
system rules to be
sure you understand how everything works.
BUY SIGNAL
• Only use a daily chart and check for signals at the close
of each daily bar
on the evenings.
• 21 SMA must be trending up and not flat.
• An inside bar must form.
• Place a buy order 5 pips +spread above the top of the
inside bar.
• Place the required stop depending on the currency pair (see
stop values)
• Place a take profit of twice the amount of the stop.
• Do not remove trade until either the entry is triggered or
the 21 SMA
changes to a down direction.
SELL SIGNAL
• Only use a daily chart and check for signals at the close
of each daily bar
on the evenings.
• 21 SMA must be trending down and not flat.
• An inside bar must form.
• Place a sell order 5 pips +spread below the bottom of the
inside bar.
• Place the required stop depending on the currency pair (see
stop values)
• Place a take profit of twice the amount of the stop.
• Do not remove trade until either the entry is triggered or
the 21 SMA
changes to an up direction.
Trade Examples
show videos:
1 -
http://www.10-minute-forex-wealth-builder.com/livebreakouttrade1/livebreakouttrade1.html
2 -
http://www.10-minute-forex-wealth-
builder.com/livebreakouttrade2/livebreakouttrade2.html
Example 1:
Above in example 1 we have two trade setups on the GBP/JPY,
the 21 SMA is in
a clear down trend with no signs of turning flat. On the
Friday an inside bar
formed and we placed our entry 5 pips below the bar with a
100 pip stop and a
200 pip profit target. 4 days passed with no market movement
before our entry
was finally triggered taking us into profit almost
immediately. Our take profit was
hit two days later with a profit of 200 pips.
The second trade was far more exciting triggering our order
into the market the
very next day and hitting our profit target the following
Monday with another
200 pips profit.
Example 2:
Above in example #2 we have another 2 good examples of this
system in action
on the EUR/USD, both inside bars formed with the 21 SMA
sloping up indicating
we can only take buy trades. The first trade was looking a
little grim as it
retraced against us after the entry day but it eventually
hit our profit target of
100 pips 5 days later. The second trade shot into profit
straight away and hit
our profit target the very next day. Remember all this was
done with about 10-
15 minutes on the evenings, nothing more.
Example 3
In this last example we have a very strong up trend on the
EUR/USD as
indicated by the 21 SMA sloping up. An inside bar formed and
our entry was
placed 5 pips above the bar as soon as it closed. The very
next day the order
was triggered and two days later the profit target was hit
for 100 pips profit.
Please keep in mind that you are not going to win every
trade with these
systems, nor any other system for that matter. Losses are
part of doing business
in the forex market but because the risk/reward ratios of
these systems are
reasonably high we can afford to have a few losses in our
trading and still easily
achieve profits on a regular basis.
I advise you to concentrate on 1 or 2 pairs at first until
you are confident, the
problem with adding too many pairs is it can increase your
chances of having
several bad trades in a row. If you do decide to watch 6-8
pairs for setups I
highly recommend you lower your risk per trade to at least
2% of your trading
capital. |
