Tagged: GBP/USD

Simple Opening Range Breakout

The London market is the most active FX market of the 3 major financial centers and where most trades take place. Therefore, it is logical to deduce that most position traders will place their bets and enter their positions when there is maximum liquidity.
We are trying to make use of the trend that can develop out of this kind of activities. The opening range trend can be observed on most market opening times. These include the Asian and US market opens as well. However, we will stick with the London market hours as there is a greater chance of it happening.

This strategy is most effective on Europe currency pairs.

This is an intraday trading strategy. The chart timeframe will be 1H.
The important hour we are looking at is from 6 GMT to 7 GMT.

At the close of the 6 GMT bar, place a Long/Buy order 2 pips above the high of the bar and a Short/Sell order 2 pips below the low of the bar.

Initial stop loss is the other side of the opening bar. When the trade goes into positive territory, trail your stop using the Parabolic Stop and Reverse indicator (or SAR). When using SAR to set stop loss point, always use the value of the previous bar that has closed, so it would not keep changing.
I would take only a maximum of 2 trades per day, if the first trade is a loser. Because, it price chops around, then there are not enough buying/selling strength around and it does not make sense to stay around!
Other ways to trail includes using a 20 EMA, a time stop (exit position at end of day). A very aggressive way to trade is to not set only initial stop loss and never trail it. Instead, I will only get out of my trade when a opposite trade signal appears. Meaning I can keep getting long and pyramiding for 5 days straight and getting out and turning short on the 6th day when a short signal appears. You can see some spectacular profits trading this way but it does not happen very often. Also, it greatly lowers your win rate. So there is a tradeoff here as always, between risk and return!
eurusd-LD BO

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Inside Bar Breakout Trade

This is a simple strategy that does not make use of any indicators, just price bars.
This strategy can be traded on any time frames and any currency pairs or even non currencies. I have success trading the Nikkei225 and other related stock index futures as well.

There are many definitions of what qualifies as a valid inside bar. To me, the entire inside bar, with its high and low should be inside the high and low of the previous bar. It does not matter what the open and close combinations are.
Once an inside bar is observed, set a limit order to long on a breakout 2 pips above the high of the inside bar or set a limit order to short on a breakout 2 pips below the low of the inside bar.
I would also use a EMA as a filter. For example, if an inside bar appeared on while price is trading below the EMA, I will only take shorts. Vice versa, if the inside bar appeared above the EMA, I will only take long breakouts.

Currency pairs I trade this on includes EUR/USD, GBP/USD and GBP/JPY. GBP pairs are especially suited for breakout strategies as they are sufficiently volatile.
Open GBP/USD chart and go to 1H timeframe.
Add 20 EMA.
Start to look out for inside bars on close. Alternatively, you can use the following indicators to help spot inside bars.
[add indicators!!!]
Initial stop loss will be on the other side of the inside bar. If the trade goes our way, a trailing stop is placed at the EMA.

For Shorts
If we are short, we will exit the trade when price closes ABOVE the EMA.
Alternatively, you can trail more aggressively by placing a stop above the highs of the previous 2 bars.

For Longs,
If we are long, we will exit the trade when price closes BELOW the EMA.
Or, you can trail aggressively by placing the stop loss below the lows of the previous 2 bars.

Our initial stops will often times be really small, sometimes even less than 10 pips on 1H timeframe. However, winning trades often generates profits of more than 2 times risk.
Example below shows GBP at 1H timeframe, and 3 trades would have been taken. The first inside bar has a high of 1.5389 and a low of 1.5371. Therefore, we will place a limit order to short at 2 pips below the low, which will be 1.5369. Likewise, the stop loss level will be at 2 pips above the high, at 1.5291.
The trade gained +99 pips on a stop loss of 22 pips, yielding a 4 times risk reward ratio. However, there were 2 losers during the same period that cost us -21 pips and -13 pips respectively.
gbp-1h-inside bar BO trade1 gbp-1h-inside bar BO trade2

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20 SMA Envelope and ATR

Suggested currency pair: GBP/USD
Timeframe: Daily, 1H
Indicators: 20 period SMA with 0.5% envelope applied, 14 period ATR

Long at open of next bar when price close above the upper bound of the envelope. Initial stop loss is ATR of the signal bar.
Short at open of next bar when price close below the lower bound of the envelope. Initial stop loss is ATR of signal bar.
If trade is stopped out, we will wait until a new trading signal appears.
If the trade is going for us, we will keep our trade open until the opposite trade signal appears.

Trade 1:
Price close at 1.4696, which is above the upper bound of 1.4564. The ATR is 191 and will be our stop loss size.
Long at 1.4696 with initial stop loss placed at 1.4505.
Closed trade at 1.5575 when Short trade signal appeared for a profit of 879 pips on risk of 191 pips.
Trade 2:
Short signal appeared and we close out our previous long and reverse our position to turn short.
We shorted at 1.5575 with a stop loss at 1.5724, a 149 pips stop loss.

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20 day High and Low Breakout

20 day High and Low Breakout

Trading entries based on new price highs and lows of N days/periods ago are as old as trend following and breakout trading itself.
However, it is not too much to say that Turtle trading and the Donchian price channel breakout methodology pushed it into the mainstream.
The trading rules are simple and straight forward. As with any trend following strategies, it performs best in a market that has large price moves and sustained trends.

Currency pairs: EUR/USD, EUR/JPY, GBP/USD, GBP/JPY and USD/JPY.
Indicators: 20 and 10 Donchian channels, 14 ATR

Japanese Yen currency pairs perform best and often have sustained trends probably due to the popularity of Carry trading strategies.

For Longs/Buys:
Set Long/Buy order 2 pips above the High of the previous 20 days.
Initial stop loss will be equal to ATR.
The 10 Day low will be our trailing stop when price move further up. Stop is placed 2 pips below it.

For Shorts/Sells:
Set short/sell order 2 pips below the Low of the previous 20 days.
Similarly, initial stop loss will be 1 ATR away.
The 10 Day high will act as our trailing stop when price moves further down. Stop is placed 2 pips above it.

20 day low is 1.5125, sell order at 1.5123
ATR is 145, so initial stop loss is 1.5268
10 day high is 1.4611
Exit trade at 1.4613
Profit is 510 pips on 145 pips risk. (3.5 times)
20 day high is 1.4770, buy order at 1.4772
ATR is 197, so initial stop loss is 1.4575
10 day low is 1.5561
Exit trade at 1.5559
Profit is 787 pips on 197 pips risk. (4 times)20-10 donchian 20-10 donchian-closeup

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