Forex profits breakout system


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Forex profits breakout system

  1. 1. all rights reserved
  2. 2. Forex Trading What is Forex? Forex stands for foreign exchange. Forex is a market that deals with the exchanging currencies in real time all over the world. If you are looking for a great opportunity to trade foreign currencies, Forex can be a great market totrade in. Forex is the largest financial market in the world. The Forex market accounts for almost 2 trillion dollars in average daily turnover each day. Forex can be a great way to trade, because with the foreign exchange market, you simultaneously buy and sell currencies, exchanging one currency for another. For instance, trading the US dollar for the Japanese Yen. Today, many investors can easily trade Forex from the privacy of their own home. There are many platforms and software that can allow almost any investor to buy, sell and check charts and information instantly. There is no center market for Forex, Forex runs on a network and continues 24 hours a day, starting from Sydney, Australia. For most investors that are interested in trading Forex, the good news is that you don’t have to have lots of capital to trade Forex. Most investors can start with a relatively small investment of about $250. A great advantage to Forex trading is that you can leverage the initial investment amount up to 200 times your investment in certain situations. So if you are looking for a great way totrade, with a low initial investment, research Forex, to see if this type of trading is right for you to invest in. Being a forex or foreign exchange trader no longer means you have towork for a bank in one of the world's financial centers. These days you can trade on your own behalf, from anywhere. Since the rise of the internet many people are doing this from their own homes, making money in their spare time or even making a full time income. But what is forex trading and how does it work?
  3. 3. A foreign exchange trader deals in currencies. He or she will sell one currency that seems to be falling in value, to buy another that seems to be rising. There are always two currencies involved in a trade (a currency pair) because when you want to buy dollars you have to have another currency to exchange for them. In the beginning it is best to be involved with just one currency pair. Most people start out trading in the EUR/USD market, that is the euro against the US dollar. This is the biggest forex market. There is plenty of information available for this market and it tends to have lower costs and be relatively stable. Nevertheless forex is a very volatile market. This means that the prices can rise and fall steeply and quickly. The risk is high. It is easy to lose money. In fact, some losses are inevitable, so you should manage your account so that you never risk too much on one trade. You can use stop losses so that your broker will automatically sell if the price goes a certain way against you. The aim is not to have no losses, but to make sure that your profits are higher than your losses so that you end up with a net gain. You will need access to a computer with a high speed internet connection any time that you want to trade. Unless you use a robot to control your currency trading, you will also need time where you can concentrate on learning a profitable system and then on trading itself. You pretty much need to be able to lock yourself away in a room to do this, at least for a couple hours a day. It is no good trying to trade from your desk at your day job with your boss interrupting you, or using a computer in the family den with kids climbing on your knees wanting to play games. You must be fully concentrated on the movements in the market or you could miss the right moment to either open or close a trade. If you are a cautious person who likes a solid investment with predictable low returns, you should not become a currency trader. Forex traders are people who enjoy risk and love the challenge of trying to turn a profit in a fast moving market. It helps if you are strongly focused on your goals and not easily swayed by emotion. It is important not to let fears of losses or dreams of huge wealth divert you from your strategy. You also need to stay aware of financial news, not only in your own country but in all of the major world powers, because this will affect the forex markets. With these characteristics and a good trading system in place, a foreign exchange trader can reap substantial gains from his or her investment.
  4. 4. The foreign exchange markets are situated all around the world. Currency trading is a global activity. Every country in the world uses money and needs to change that money into other currencies in order to trade or interact with other nations. Currency exchange happens at every level of society. As an individual, you may have changed money when traveling on business or on vacaation. Or maybe you have sold something on eBay to somebody in another country. Their payment comes in to your account in their own currency, and the bank or other payment processor such as PayPal changes it for you. That is currency exchange at the root level. Foreign exchange or forex trading has a different purpose, however. When you are trading on the foreign exchange markets you are not buying another currency because you need it. You are buying it in the hope that it will rise in value, so you can change it back and end up with more money than you started out with. Of course, it is risky. The price movement could go against you and then you would end up with less money instead of more. So you will want to gather plenty of information about currency trading before you start. Forex trading began in the 1970s when the major currencies were deregulated so that their values were no longer fixed. The banks and large investors quickly saw the potential for making money from the changing prices. The main forex marketplaces are the big financial centers of the world. London sees the highest activity with New York second and Tokyothird. Other major players are Sydney, Zurich and Frankfurt. Originally you had to be in one of those places to trade money, or at least have a telephone connection with a broker who was there. It was very difficult for somebody who was not on the spot to act fast enough to react to the sudden fluctuations in price that can happen in the forex markets.
  5. 5. But modern advances in technology have changed all of that. Since the rise of the internet it has been possible to trade on your own account from anywhere. This means that it has become easier and easier for the little guy to get a piece of the action. While some people never think about foreign currency from one overseas trip to the next, others are studying charts and financial information or even using automated software in the form of forex robots to make money from the rising and falling prices with the aim of becoming financially free by trading on the foreign exchange markets. You can trade Forex from home with relative ease. Trading Forex from home is one of the most popular ways day traders and small investors are able to reach their investment goals from the privacy and comfort of their own home. If you are interested in trading Forex from home, here are some tips. Trading Forex from home is incredibly simple. There are plenty of brokers that enable you to trade in real time with great features. Finding a Forex broker is relatively simple, however you should put lots of thought into which features you would like, the information they provide their members and the ease of use of their trading software. Trading Forex from home is relatively easy once you have your computer set up and a broker picked out. Before you start totrade Forex with actual money, it is important to know all the ins and outs of trading Forex as well as how to conduct research and use your brokers Forex trading software. Many brokers allow you to try simulation trading. A simulation trading environment is where you can trade in real time foreign currencies with the actual software and features. The only difference between simulation and real trading is that with simulation software you don’t have trade real money. This can be an excellent tool to learn how to trade Forex from home. Finding information from home regarding Forex is also very easy with the help of Forex forums, broker trading resources and Forex charts. Many investors use the Forex forums to find out about new tools, spot trends in the market and hear commentary on new products or forecasts. You can also find loads of information at your broker’s site. Most brokers usually offer great charts to track currencies and
  6. 6. plenty of articles that can fill you in on information that can help you trade. So follow the above suggestions to trade Forex from home. One of the most basic Forex terminologies is ask price. Ask price is the price a currency is offered for. When trading Forex, you will usually see both the ask price and sell price for each currency listed next to each other. Base currency, stands for the currency that all your currencies are converted to once you close the trade. The base currency usually is the US Dollar for people doing business in America. Going long and going short are also popular basic Forex terminologies. Going long means that you invest in a currency for the long term. Going short means that you sell a currency that is not yet owned by you- the seller. Going short can be a great way to profit in certain situations, but can involve high risk. Pip is also a popular basic Forex term. Pip stands for the difference between the bid price and the asking price. The range is also an important term because it offers the seller information on the highest and lowest prices of currencies being offered. So if you are interested in trading Forex, it is important that you read and understand the above basic Forex terminology. If you are into trading Forex, then you probably take analyzing Forex data very seriously. Most Forex investors choose their trades each day by going over lots of information, charts and opinions in order to analyze Forex data. Here are some great tips and resources for analyzing Forex data. Analyzing Forex data can be easy if you have and utilize the right tools. Most Forex brokerages supply their traders with a wealth of information and many tools in order to analyze their Forex data and make well educated and prudent trades. Just like any other investment vehicle, Forex does have risks involved and you can lose your money very easily if you make ill conceived trades, analyze your Forex data the wrong way, or hit a patch of bad luck.
  7. 7. A great resource to use when analyzing Forex data are specialized Forex charts, Forex reports, and opinions written about the Forex trading market. Many people also look to Forex simulation platforms to test out their Forex analysis process. On simulation platforms, you can trade real time, just like normal, except you don’t have towager real money. This way you can test your systems, strategies and analysis. Not only do Forex brokerages give you great resources, but they try toeducate their traders on how to use them properly. For instance you can read online tutorials on how to use certain tools, how to analyze data, and how data can be viewed. There are many great ways to learn how to analyze Forex data, however, you have to learn how to use it to your advantage. Most Forex brokerages have their own software program to trade Forex. Forex software is an important part of trading Forex, because it dictates how easy and quickly you can interact with your brokerage to buy, sell and trade Forex. If you are looking for great a great brokerage, here are some tips on choosing a brokerage with great Forex software. For most people trading Forex, a minute or two can be an eternity. If you need to make a trade, your Forex software should be extremely easy tooperate and navigate quickly on almost any computer and help you make the right trade according to your guidelines. Most Forex brokerages have simulation trading environments, where you can learn to trade Forex, use their Forex software to do your trading and wager credits instead of real money. Most Forex traders when starting out should take advantage of these simulation environments to learn how to interact with their Forex software and trade the foreign currency markets. Almost all Forex brokerages offer many of the same features, however the ease of using the software can make a big difference in how you navigate, employ important features and feel comfortable over all trading Forex. So if you are looking into trading Forex, check out different brokerages Forex software, it can have a definite impact on your Forex trading.
  8. 8. About The System This system is an Intraday trading system, works best on the 1 hour chart for all currency pairs. However, it would give best results with trending pairs ( currency pairs with strong trend, like JPY pairs ) . In this system we are going to use moving averages toidentify the trend – visual guidance only – and we are going to use price patterns to enter the market. Our exit strategy will be based on support and resistance levels. It’s very important to pay attention to news releases and economic announcements and STOP trading until the market reacts to the news. Usually after 15 to 30 minutes. As an intraday trader, it’s also very important toknow what time of the day is best for trading and NOT to trade anytime of the day, or any day of the week. If you’re not an experienced trader, please do not make any changes to this system. Test it on demo account for at least one month and more than one currency pair. TREND INDICATOR SMA ( smooth moving average ) : Period 200 Shift 0 Apply to : weighted close Blue SMA : Period 50 Shift -10 Apply to : weighted close Red UP Trend = Blue Line Above Red line – Down Trend = Red line above Blue line
  9. 9. Entry Pattern We are going to use the Triangle pattern as a trigger or setup to enter the market in the direction of the main trend. The Triangle pattern is simply Two small trends ( upper trend – lower trend ) crossing each other and form a shape that looks like a triangle.
  10. 10. Price usually moves inside that triangle and then we should see a breakout. The direction of the main trend is not important at all. We are not following the trend. We are trading breakouts. At the above example, the breakout happened in a down trend movement. But it could also be an Up trend breakout. Your main job now is to practice on recognizing triangle patterns. Once you learned this skill, the rest should not be a problem at all. Remember, you only need to see an uptrend crossing a down trend and form a triangle shape.
  11. 11. Try topractice on 1 hour time frame or 4 hour time frame. Smaller time frames are not recommended in the beginning. It doesn’t matter where the shape is formed, in the middle or at the beginning/end of a trend. The direction that the triangle is pointing at, also doesn’t matter. One thing you should keep in mind, this pattern happens all the time. No matter what currency pair you are trading or what time frame you are using. And that’s a big advantage! So, feel free to practice on any currency pair you like. 1 hour/4 hour time frames for now. And when you feel that you are ready to take the next step .. keep reading!
  12. 12. System Rules The first thing to do is to know the direction of the trend according to the trend indicator. If it’s a down trend, then we only enter sell trades. If it’s up trend then we only enter buy trades. The next thing to do is to draw the support/resistance levels. We are going to use those levels for targets. BUY SIGNAL 1 – Up Trend 2 – Triangle Pattern (Up Trend Breakout ) SELL SIGNAL 1 – Down Trend 2 – Triangle Pattern ( Down Trend Breakout ) Targets and Stoploss Support and resistance. If you don’t know how to work with support and resistance levels, please take some time to read about it and understand it before you start using this system. Support and resistance levels are identified based on the price patterns and price turning points that took place in the past. Support levels try tostop falling price as it attempts todrop even further. Resistance levels resist to the rising price that attempts togo even higher. Support or resistance levels that were tested by the price and sustained the pressure by not allowing market tosurpass them, are considered as strong levels. If Support level is broken it becomes future resistance level. If resistance level is broken it plays a role of support for future market moves.
  13. 13. Examples EUR/USD – 1 Hour Chart After an Up trend was confirmed by Moving averages cross, a triangle pattern was formed and we waited for a breakout in the direction of the trend. Few hours later, a breakout happened and we opened a BUY order based on the signal we had. We placed our stop loss at the last support level, and placed our target at the resistance level. You can always use a trailing stop to lock your profits and protect your trade from sudden reversals. In this example our profits were 100+ pips
  14. 14. Next Example .. EUR/USD – 4 Hour chart My favourite time frame is 4 hour chart. It gives more clear signals and more time to spend with friends and family without having to watch the chart all day long .. and it also gives more pips to collect.  In this trade, the major trend was up trend. So I knew that I’m only allowed to open buy orders. We had a triangle pattern formation, followed by an up trend breakout .. perfect! All we had to do is to set the stop loss at the last support level and set the target at the next resistance level. This time, profit was 400+ pips
  15. 15. Reversals Sometimes, price would move in the opposite direction of the current trend for a while before it reverses back. Usually, it’s not recommended to trade in this case and just wait until price reverse. But .. for experienced traders ONLY there is another option: trading reversals! Example: EUR/USD – 4 hour chart This kind of trades are risky, and only recommended for experienced traders only. It’s also recommended to follow other strong reversals signs besides the triangle pattern, like double tops/bottoms or heads and shoulders. And with this kind of risky trades, it’s highly recommended to use maximum money management plan. Example : if you usually trade with 1.0 lot size and 3% risk of your invested capital. Then at this case you should trade with only 0.5 lot size and 1% risk.
  16. 16. Easy Targets I know that sometimes it not easy to spot support and resistance levels or set them correctly, especially for new traders. So here is a way to get this done automatically for you, even if you don’t know the difference between a support a resistance! We are going to use .. Fibonacci levels! This is a very powerful tool .. just look at it! Notice how price – religiously – follows Fibonacci levels and moves between them. All you need to do is to place the Fibonacci levels indicator – comes free with almost all trading platform like Metatrader – at the high/low of the last wave before the breakout. If it’s an up trend breakout, place the 0 level at the low of the wave, and 100 level at the high. The exact opposite if it’s a down trend breakout. Place the 0 level at the high and the 100 level at the low.
  17. 17. Here is another Example ..
  18. 18. Trading Examples EUR/USd – 1 hour Chart Signal = Sell @ 1.2680 Stop loss @ 1.2758 Target @ 1.2552 Profit = 128 pips
  19. 19. EUR/USD – 1 Hour chart Signal = Sell @ 1.2758 Stop loss @ 1.2828 Target @ 1.2604 Profit = 154 Pips
  20. 20. Market Hours The forex market hours stretch from Monday morning in Sydney, Australia to Friday afternoon in New York. During that time the market is open somewhere around the globe at all hours of the day or night. However it is not a 24/7 market because it does shut down on weekends. 24/5 would be more accurate. If you need to know the exact times that the markets open and close, you have to take time zones into consideration. It is very simple when expressed in UTC. This is Universal Coordinated Time, formerly known as Greenwich Mean Time. This is the standard (winter) time in Greenwich, London which is the point of zero longitude on the globe. So, the normal forex market hours are 22.00 Sunday UTC to 22.00 Friday UTC. This is 10 pm in the UK in winter time. New York is 5 hours behind the UK so the global forex market opens and closes at 5 pm Sunday/Friday in New York, 2 pm on the US west coast, 11 pm in Germany, 8 am Monday/Saturday in Sydney. Things get a little complicated when you start totry totake summer time daylight saving into account. This makes one hour difference in countries that observe it. But daylight saving operates in a different way in the southern hemisphere countries such as Australia which have summer time from September toMarch instead of March to September. The hours of the different major national markets are as follows: Sydney: 10 pm to 7 am UTC Tokyo: 12 midnight to 9 am UTC
  21. 21. London: 8 am to 5 pm UTC New York: 1 pm to 10 pm UTC Or we can express that in EST (Eastern US time): Sydney: 5 pm to 2 am EST Tokyo: 7 pm to 4 am EST London: 3 am to 12 noon EST New York: 8 am to 5 pm EST You can see that these correspond to 24 hour cover. However, this does not necessarily mean that trading will be good at all of these times. Just after a major market opens, the prices can be very volatile and unpredictable. Many traders will stay out of the forex market for up to an hour four times a day when the financial markets are waking up in these major cities. The US dollar is the most traded currency by a long way, involved in 2.5 times as many trades as its nearest rival the euro. This means that events in the USA have a greater impact on the financial markets than events in other countries. The New York market tends to slow down around 3 pm local time (8 pm UTC) and if you are involved in a US dollar pair, this can be a good time to stop trading for the day. So theoretically you can trade 24 hours a day from Sunday night to Friday night. Automated software in the form of a forex robot can even make this physically possible. However, a cautious trader will choose his times and will not be active during all of the forex market hours.
  22. 22. Margin Trading Forex margin trading is a way of applying leverage toincrease the purchasing power of your money. Leverage simply means using a small sum to control a much larger sum. This is possible because it is unlikely that the value of a currency will change by more than a certain percentage over a short time. So you can place a few hundred dollars in your brokerage account to trade on the margin - the amount that you think the price will fall. Your broker will in effect lend you the balance. Trading on margins is also known in stock and futures trading, but because of the special nature of currencies, you can get a lot more leverage in the forex market. Depending on your broker's terms, you may be able to control 50, 100 or even 200 times your account balance. This can lead to big profits if you are successful, but it can also mean big losses if not. In general, the more leverage you use, the more risky your trading is. We can understand leverage and margins if we consider an example. Imagine that the current rate on the British pound to US dollar forex market is shown as GBP/USD 1.7100. So to buy one British pound you would need $1.71. If you expected the value of the dollar to rise against the pound you might decide to sell enough pounds to buy $100,000. If your broker used lots of $10,000 each, this would be 10 lots. Then you would sit back and wait for the price to go up. A few days later you might find that the price had moved to GBP/USD 1.6600. Sure enough, the dollar has risen and the pound is now worth only $1.66. If you sell your dollars now and buy back into pounds, you will have made a profit of 2.9% less the spread. 2.9% of $100,000 is $2,900, so that would be an excellent trade. But most of us do not have $100,000 spare cash that we want to trade on the currency exchange market. So here is where the principle of forex margins comes into play.
  23. 23. Since you are buying and selling different currencies at the same time, your own money only has to cover any loss that you might make if the dollar falls instead of rising. And you would put a stop loss into place to limit that loss, so $1,000 might be all you needed to have in your account to make this $100,000 purchase. Your broker guarantees the other $99,000. In fact many brokers now operate limited risk amounts where the account will automatically close out the trade if whatever funds you have in your account are lost. This prevents margin calls which can be disastrous for a trader because they mean that you can lose more than you have. But with a forex limited risk account that is not a possibility. The broker's software that you use to control your account will not let you lose more than your account balance. Using leverage in this way is so common in currency trading that you will soon do it without even thinking about it. Still it is important to keep in mind the risks. Lower leverage is always safer and you may never want togo to the maximum forex margin that your broker would allow. Always remember that Forex trading like any investment is not a sure thing. Just like any type of investment or investment vehicle there are risks involved. No matter how much you research your data or how much thought you put into your trading, you can always lose money. Another important Forex trading tip is that if you are just starting out, learn as much as possible about foreign exchange trading. There are many theories, strategies and tools to help you trade Forex. Learn which tools are available and how to use them effectively. You shouldn’t decide to just throw money around into an investment and go with the flow. Forex trading is not a casino game and you can lose thousands of dollars of your investment. One of the most important Forex trading tips is to choose your trading broker carefully. Don’t just enroll with a trading broker because they offer you great incentives or have a great web site. Shop around; find a Forex trading broker that can help you reach your investment goals. There are plenty of Forex trading brokers and many of them might not have the resources to help you with your individual investment needs. So if you are looking to trade Forex, follow these Forex trading tips.
  24. 24. Many people choose to invest and trade in the Forex markets because it is very easy to get started. Many Forex brokerages require a small minimum investment, usually about $250. With this small investment, you can leverage your money to invest in the market by up to 200 times in certain situations. Finding a Forex broker is also important because each broker’s tools and resources are different. You might find that a Forex broker has great resources and information to analyze and spot trends in currency trading. Finding a Forex broker is also important because you can pick and choose which software platform to use to make trades. You might experience that some brokers have awkward software platforms that can be difficult to understand or to execute a trade on. Doing important research in the beginning can help you find the right Forex broker to facilitate your trades and research. Another great tip when finding a Forex broker is to see if the broker offers simulation trading. Simulation trading is a great way to use the broker’s software and tools in real time without wagering real money. So if you are interested in investing and trading in the foreign currency market, look at different Forex brokers for the best software, information and resources. Doing lots of research on brokers will help finding the right Forex broker to fit your needs. Most Forex brokers help you trade by providing you with up to the second, real time information in the form of Forex charts. Most Forex charts are available on any major currency, exotic currencies and major market indices that can help you predict trends and performance. Not only can you check out information fast and easy with charts, most brokers allow you many features that can help you view charts in different ways. For instance you can view a standard bar chart, dot chart, or even forest chart which can easily show you the up and downs of your specific focus. Many Forex brokerages also include daily commentary and information on how to get the most out of your charts, by teaching you technical analysis and the ways to tease information from your Forex chart. If you would like to trade Forex, look into using powerful tools such as Forex charts in order to make educated investments. MASTER TRADER
  25. 25. DISCLAIMER U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risks. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site/ebook. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. All information on this website or any e-book purchased from this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold the authors/publishers and any authorized distributors of this information harmless in any and all ways. The use of this system constitutes acceptance of our user agreement.