End of day trading allows you to benefit from the volatility in the Forex markets in a time efficient manner. Once a day, on the New York market close, you can assess the daily charts and make decisions about what to buy and sell, as well as how to manage your existing positions.
There is no need to watch the markets all day. As you have more time, you can trade a greater number of markets and run multiple non-correlated strategies.
One of these strategies that is well-suited to end of day trading is breakouts. Here is one way you can trade breakouts in a somewhat systematic fashion. The Forex market contracts into periods of little movement low volatility and then expands into trends. Capturing the moment the market begins its expansion into a trend can be a nice way to trade, as:.
This means you can have some big winning trades as the trend still has a long way to go , but also keep the win rate relatively high compared to picking bottoms. My favourite way to capture breakouts is to wait for a low volatility low vol range to form and enter a trade on the first move outside the range that has formed. You can see that I use the Bollinger Bands to give me a non-discretionary definition of one of these low volatility periods.
Typically, I want to see the Bollinger Bands width indicator fall below 25 and then see the price close above the Bollinger Band in the direction of the trade. Wait for the price to close over the Bollinger Band in the direction of the trade.
The key to breakout trading is that you have larger winning trades than you have losing trades. To achieve this, you need to place a stop-loss. I measure a 1. This is not overly optimized and anywhere between 0. The reason I use the 1. If the win rate is too low, the signals can be hard for people to follow. Where you set it will depend on your risk tolerance and trading objectives. As soon as they earn a profit, they get emotional and close out of their trade.
In order to let the profits run, you need to set a pre-planned exit strategy. To do this, put a profit target on the next major level. To identify this level, I look at a weekly chart for the nearest support and resistance level. Often, the trade does not go to the target and it does not make sense to give all your profits back if the market reverses.
To this end, we apply a trailing stop using the supertrend indicator with the settings of factor 2 and periods 7. Once you enter, the markets can do many different things, so sometimes it makes sense to adjust your exit strategy based on what is going on in front of you. You can exit on strong reversal patterns and fundamental catalysts against your position. You can also consider trailing the stop tightly in fast-moving markets or using a 1: Here is an example of using tighter trailing stops on part of the position as the market went a bit parabolic.
When you exit using trade management rules, it pays to scale out of the position, rather than exit all in one go. Be aware that trade management is powerful, but it is dangerous in the hands of emotional traders. While the trading model above is quite simple, there is great benefit to using a variety of inputs to determine the quality of the trade.
This allows you to trade more on your good ideas and less on your bad ideas. Click here to read about how to determine if your trade is good or not. A quality trades are the best ones, the ones that you really like. B quality trades are your bed and butter trades that produce the majority of your profits. You can trade much smaller or not at all on these trades.
Ranking trades allows you to use all the knowledge and experience you have built up over the years, while keeping the strategy and decision-making progress simple and clear. By trading breakouts, you have the opportunity to capture some nice trends and can keep the win rate relatively high. It does take disciple and practice to implement this type of strategy day after day. You will have losses to deal with and you need to hold on to your trades and not cut your profit short.
This is the strategy I am using now and, as you say, if gives us an opportunity to enter very nice movements. The one thing is, as you indicate in your post, we have to be very disciplined and keep the emotional monster under control, otherwise it can get ugly. The exit strategy is also a must. I can say myself that many of my loosers could have been winners had I have an exis strategy implemented. As a matter of fact, just a couple of weeks ago, I had winning positions open with the NZD and did not manage them properly and had to see them turning into loosers after the elections.
End of Day Forex Trading Strategies: Breakouts by Sam Eder Oct 4, - 9. What is a breakout? Capturing the moment the market begins its expansion into a trend can be a nice way to trade, as: You are getting in near the beginning of a trend; You are not trying to pick a bottom.
How to capture breakouts My favourite way to capture breakouts is to wait for a low volatility low vol range to form and enter a trade on the first move outside the range that has formed. Here is an example of a recent trade: Wait for the Bollinger Bands width indicator to fall below 0.
Note, you need to use daily charts with New York close Candlesticks for this. Cut losses The key to breakout trading is that you have larger winning trades than you have losing trades. Place a stop-loss at a distance of 0. Then I go back to the daily chart. Place a target on the closest weekly support or resistance level. Protect profits Often, the trade does not go to the target and it does not make sense to give all your profits back if the market reverses.
I physically trail my stop up just below the supertrend indicator. Place a hard-trailing stop on the supertrend indicator. Adapt to what is going on in front of you with trade management Once you enter, the markets can do many different things, so sometimes it makes sense to adjust your exit strategy based on what is going on in front of you.
Use discretion to manage your trade as it goes in your favour. The importance of using a ranking system While the trading model above is quite simple, there is great benefit to using a variety of inputs to determine the quality of the trade. As you place each trade, give it a rank of either A, B, or C. Practice makes perfect End of day trading in Forex is a great way to trade.
It is not time-consuming, nor do you need to be constantly glued to the markets. If you have any questions, please let me know. Hi, Sam This is the strategy I am using now and, as you say, if gives us an opportunity to enter very nice movements. Sad story but one from which I have learnt a lot. Search the Forex Blog Search for: Join the Newsletter for Updates! Where should we send your updates? We promise to keep your email address safe.
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