Advance Forex Strategy – The 4Hour Break Out Method!

Advance Forex Strategy – The 4Hour Break Out Method is  designed for traders like me who don’t wish to spend  all  day  long  in  front  of  their monitor.  Once  Mastered  this  system will  reward  you  for  the  rest  of  your trading career.

This is trend following system using a breakout  entry  formation  that  usually has  great  results.  Although  I  mainly use this system on the 4 hour charts it works equally as well on 1 hour charts and daily charts. This method can be traded on any pair at all. I watch around 10 pairs to look for setups. If you are planning on trading this many pairs it is

very important that you keep in mind the correlation of each pair, for example  you  do  not  want  to  have  a  long  position  on  the  EURUSD and  USDCHF  as  these  pairs  are  strongly  correlated  so  all  you  are really doing is doubling up on your position.

 Note:   correlation   means   that   the   pairs   move   in   ether   the   same direction or the exact opposite.

Setting up your charts:
Lets  start  by  setting  up  your  chart  of  your  favorite  pair,  mine  is  the EURUSD,  open  the  chart  and  add  the  following  exponential  moving averages.

30 (green),150 (orange),200 (blue),365 (red)

This is the basis for all the entries in this system, you will not need to change your chart at all from now on.

30 Exponential Moving Average:

The  30ema  is  the  trend  indicator,  when  price  is  in  a  good  trend  it tends to pull back to the 30ema and move away, the 30ema must be sloping up or down before we make any trades.

150, 200 & 365 (Exponential Moving Average):

The 150, 200 and 365ema act as super strong dynamic support and resistance. Go ahead and look at them on your chart and you will see how price bounce’s off these lines more often than not. You will often get a breakout formation after price has bounced off of one of these moving averages. They are also very useful as target areas for profit taking on open positions.

Your  chart  should  now  look  like  the  one  below,  you  can  use  any colors you wish for the moving averages but I will stick to these colors for  demonstration  purposes.  (Notice  how  price  bounced  off  of  the green 30ema!)

 [click on image to view]

 

Trading Breakouts
If  you  are  feeling  a  little  overwhelmed  by  the  5Minute Scalping Strategy.Then  take  a  break  and  come  back  later  with  a  fresh  mind.There  is  nothing  worse  that  trying  to  learn  it  all  at  once  only  to become frustrated because it doesn’t make sense.

Trading breakouts is one of my favorite trading techniques of all. You will find after trading this system for several trades that you will easily begin  to  spot  the  trades  with  no  momentum  and  close  them  with  a small  loss  instead  of  letting  the  trades  run  into  your  stop  loss. The name of the game is to have wins larger than your losses.

As I said earlier I watch 8-10 pairs for setups, this provides me with plenty of entries so I can take only the very best ones.Trading  with  the  trend  already places the  odds  in  your  favor  all  you need  then  is  a  place  to  enter  into  the  market  with  high  odds  of encountering little draw down.

Consolidations  and breakouts  happen all  the  time  in  trends  and  are perfect high probability places to enter into the market. The most common way to enter with a break out is right on the break of support/resistance,  however  if  you  have  ever  tried  this  then  you know it is very hit and miss. The Majority of the time you will get false breakouts which take out your stop and leave you wondering why you entered into the market in the first place.

This is the fools way to get into the market, what you need is a place of   low  risk   high   reward,   read   on   and   discover   one   of   the   best techniques I know of. There are 2 types of breakouts that I trade one is more reliable than the other, it is up to you if you choose to trade both or not.

The first is a trend line breakout see diagram below for example.

 [click on image to view]

As you can see price is in a up trend and formed a trend line against the  trend.  Price  then  broke  out  and  retraced  back  to  the  trend  line giving us a fantastic opportunity to buy In the direction of the trend.

 

The second and more reliable setup is a double top/bottom breakout.see diagram below:

 

In
this  diagram  price  is  in  an  up  trend  and  formed  a  double  top
against the trend. Price then broke out and retraced back to the
trendline  giving  us  a  fantastic  opportunity  to  buy  in  the
direction  of  the trend. I find this setup on average more profitable
than the previous.

On my next post we shall be delving into the system proper with LIVE example trades…And don’t forget to drop your comments below using the comment box!

You Can Read: “The Advance Forex Strategy – The 4Hour Break Out Method[PART 2]” Here!