Hi People!
I have over some period of time developed a breakout-system that I find good enough to revile to the public.
I’m not a very experienced Forextrader so there might be some aspects in my system that you, as an experienced forextrader, might think is wrong, bullshit or whatever.
I can only say that this works for me, and one of the reason I post my system is that I want to give something back to this forum. I have read a lot of the systems in this forum and I have learned a lot thanks to that.
I hope that you who reads this system either like it for what it is or maybe gets an idea to make a system of your own.
Background
The system is built on my theory that everything in this world affects another thing. So also in trading the Forexmarket…
But the question was how much a past scenario affects a future scenario.
I tested a whole lot of things to see if it had some kind of connection with each other.
I drawed lines almost all over the chart just to find something that would match the theory I had.
I calculated with pivot and so on, and so on, and so on.
I failed every single time. I just could not find anything….
Maybe I wasn’t smart enough I thought for my self. Until one day just sitting in my chair in front of my computer I came up with an idea I had not think of before.
My lines were born. And because bad fantasy I named them JL-Lines were JL is my initials of my real name.
JL-Lines - Setup
Then what is JL-Lines?
(See second post in this thread to se.)
As you can see there is 4 lines. Every single one of them has a significant meaning.
I will tell you more of that later in how I trade my JL-Lines.
But… by now you probably want to know how I make my lines.
The lines are built on Fibonnaci numbers… or more correct the percentage that we forextraders like to use to see support and resistance levels.
As you know some of the percentage that are most used are:
100%
61.8%
50%
38.2%
23.6%
I use this number of percent to measure the importance in each days price range.
I believe that how yesterday price move was having more importance then the importance of the 10th days move has.
For example:
The 12th of December have more importance for 13th December, then the 6th of December have.
Because the lines are very important for this system I will give you a complete example of how a (theoretical) calculation could look like.
Theoretical Example:
Lets say that we want to trade the Monday 11th of December 2006 accordingly to JL-Lines. The opening price of this day is 1.9580 at GBP/USD.
We then look back to the next previous trading day, that in this case are Friday 8th.
The range from the opening to the close was 98 pips.>>
The importance of this day is 100% so we give the first previous day 98 pips in importance (1 * 98 = 9http://www.spreadtrade2win.com/forum.../icon_cool.gif.
-----------
The second previous day is the Thursday. In this case the opening to close was 72 pips.
The importance of this day is 62.8% so we give the second previous day 45.2 pips in importance (0.618 * 72 = 44.496).
-----------
The third previous day is the Wednesday. In this case the opening to close was 104 pips.
The importance of this day is 50% so we give the second previous day 51 pips in importance (0.5 * 104 = 51).
-----------
The forth previous day is the Thu. In this case the opening to close was 85 pips.
The importance of this day is 38.2% so we give the second previous day 32.47 pips in importance (0.382 * 85 = 32.47).
-----------
The fifth previous day is the Mon. In this case the opening to close was 124 pips.
The importance of this day is 23.6% so we give the second previous day 29.264 pips in importance (0.236 * 124 = 29.264).
The first part of the calculation is now done. You now know the importance each day will have in pips on your trading day.
To sum it all up it looks like this.
1 – 98 Pips
2 – 44.496 Pips
3 – 51 Pips
4 – 32.47 Pips
5 – 29.264 Pips
We now need to calculate the average in pip.
(98 + 44.496 + 51 + 32.47 + 29.26) / 5 = 51,0452 Pips
This is the channel were the price will move until it breakout in some direction.
The line are drawed equal away from the price opening.
To make that happens you just take 51.0452 Pips divided by 2.
The results are: 25.5 Pips (use 26 Pips) above from the opening of the new day and below from the opening of the new day.
You should now have 2 lines drawned at your chart. One at 1.9606 and one at 1.9554.
You now have a 52 Pips channel.
I call this lines for the Break A, and Break B. Break A stands for Breakout Line Above, and Break B stands for Breakout Line Below.
Now we need only two more lines to have the setup done. This lines are the Break Stop H (Breakout Stop High) and Break Stop L (Breakout Stop Low).
These two lines are calculated in the EXACTLY the same way as we calculated the Break A and Break B –lines.
The only difference is that insteed of using the range in pips from the opening to the close that day we use the high and low of the exact same day.
Lets say that the sum up of this calculation would be as follow (Please remember that this is only hypotetical pips, opening and close and so on.):
1 – 164 Pips
2 – 93.5 Pips
3 – 72 Pips
4 – 67.8 Pips
5 – 42 Pips
The average in pips would then be as follow:
(164 + 93.5 + 72 + 67.8 + 42) / 5 = 87.86 Pips
Divide 87.86 by 2 and you will get: 43.93 = 44 Pips
Use this in the same way we did with Break A and Break B –lines.
i.e. You draw a line 44 Pips above AND below from the opening for the trading day.
You will now have all four lines.
Breakout Stop High at 1.9624
Breakout Line Aboveat 1.9606
Breakout Line Below at 1.9554
Breakout Stop Low at 1.9536
I have not the knowledge of how to program indicators, but I have a Excel doc. that I use to calculate these lines.
If some one wants to make a indicator… please be my quest. I would be very happy if someone would do it.
The set up is done… all you need to do now is use it correct….
How to trade the JL-Lines
Now you have the lines at your chart and are ready to trade it.
I will only describe how I trade it. I will not tell you how you should trade it. I believe that it is up to the trader himself how he/she wishes to use it.
I use 1H chart but you can use 4H, 30 Min, 15 min, 5 min and so on.
But remember that the lower timeframe you use the less importance it makes.
I only place trades at the close of a bar. Never before it close.
In my charts you will also see pivot points, yesterdays High - Low and Vegas tunnel lines. These are of course optional, but I like them there and I use them in my trading.
For some of you my stop loss might seem too tight, and that might be true. It is up to each one of you to have whatever money management as you like. The reason I use tight stop losses is that I rather take 5 days with small losses and one day with a very big profit then 5 medium losses and only one big profit.
But… I have never experienced big losses OR many days losing with this strategy.
So I guess that my stop loss rules might be a very good way to trade this strategy.
I have for the last 5 weeks made a profit of 843 pips. Not included the spread.
Different brokers use different spread so it is up to you to test this at your broker.
But if I would calculate the spread that I have on FX Solution it would be 843 – 125 = 718 Pips profit.
I have only trade this at GPB/USD. Mainly because the manually calculation takes some time to do.
Rules Long positions:
Go long if the candlestick close between Break A and Break Stop H.
Put stop loss at the opening price of the day.
*Or at Break B (read about that below).
When I gained 20 Pips I move my stop loss to the Break A line.
If the price continues in my favour I move my stop loss to the nearest line (JL-Lines, Pivot Lines, yesterdays high - low or Vegas lines) as soon as the price is 30 pips above the nearest line.
Never put a trade if the candlesticks opening moves from below the Break A to close above the Break Stop H.
Rules short positions:
Go short if the candlestick close between Break B and Break Stop L.
Put stop loss at the opening price of the day.
*Or at Break A (read about that below).
When I gained 20 Pips I move my stop loss to the Break B line.
If the price continues in my favour I move my stop loss to the nearest line (JL-Lines, Pivot Lines, yesterdays high - low or Vegas lines) as soon as the price is 30 pips below the nearest line.
Never put a trade if the candlesticks opening moves from above the Break B to close below the Break Stop L.
Special stop loss
If the channel is thinner than 40 pips i use the Break B line as stop loss nr.1 when i go long.
I use the Break A line as stop loss in a short trade if the channel is thinner then 40 pips.
Use a trailing stop loss I you prefer that.
Timeframes
Yes it work with weekly chart and monthly chart also. But you will need a much bigger stop loss.
If you use I at a week chart you need to calculate every weekly range from open – close and high – low in the same way as discibe above in “Theoretical Example”.
Then you need to take posistion at a daily chart or 4H chart.
If you use monthly chart you need to take positions at weekly or daily chart.
I never trade at this timeframe because I have not afford the stop loss.
My recommendation is to calculate the daily importance and take position at 1H charts.
Summary
Well that’s it… I hope you understand the system. I apologize if my spelling sometimes is very bad.
If someone wants to make a indicator I would be very thankful and happy.
If you have ant question at all just ask them. I will try to answer as fast and correct I can to help you out.
/ JoLimoney <STYLE type=text/css><!--td.attachrow{ font: normal 11px Verdana, Arial, Helvetica, sans-serif; color : #000000; border-color : #000000; }td.attachheader { font: normal 11px Verdana, Arial, Helvetica, sans-serif; color : #000000; border-color : #000000; background-color: #D1D7DC; }table.attachtable{ font: normal 12px Verdana, Arial, Helvetica, sans-serif; color : #000000; border-color : #000000;border-collapse : collapse; }--></STYLE>
I have over some period of time developed a breakout-system that I find good enough to revile to the public.
I’m not a very experienced Forextrader so there might be some aspects in my system that you, as an experienced forextrader, might think is wrong, bullshit or whatever.
I can only say that this works for me, and one of the reason I post my system is that I want to give something back to this forum. I have read a lot of the systems in this forum and I have learned a lot thanks to that.
I hope that you who reads this system either like it for what it is or maybe gets an idea to make a system of your own.
Background
The system is built on my theory that everything in this world affects another thing. So also in trading the Forexmarket…
But the question was how much a past scenario affects a future scenario.
I tested a whole lot of things to see if it had some kind of connection with each other.
I drawed lines almost all over the chart just to find something that would match the theory I had.
I calculated with pivot and so on, and so on, and so on.
I failed every single time. I just could not find anything….
Maybe I wasn’t smart enough I thought for my self. Until one day just sitting in my chair in front of my computer I came up with an idea I had not think of before.
My lines were born. And because bad fantasy I named them JL-Lines were JL is my initials of my real name.
JL-Lines - Setup
Then what is JL-Lines?
(See second post in this thread to se.)
As you can see there is 4 lines. Every single one of them has a significant meaning.
I will tell you more of that later in how I trade my JL-Lines.
But… by now you probably want to know how I make my lines.
The lines are built on Fibonnaci numbers… or more correct the percentage that we forextraders like to use to see support and resistance levels.
As you know some of the percentage that are most used are:
100%
61.8%
50%
38.2%
23.6%
I use this number of percent to measure the importance in each days price range.
I believe that how yesterday price move was having more importance then the importance of the 10th days move has.
For example:
The 12th of December have more importance for 13th December, then the 6th of December have.
Because the lines are very important for this system I will give you a complete example of how a (theoretical) calculation could look like.
Theoretical Example:
Lets say that we want to trade the Monday 11th of December 2006 accordingly to JL-Lines. The opening price of this day is 1.9580 at GBP/USD.
We then look back to the next previous trading day, that in this case are Friday 8th.
The range from the opening to the close was 98 pips.>>
The importance of this day is 100% so we give the first previous day 98 pips in importance (1 * 98 = 9http://www.spreadtrade2win.com/forum.../icon_cool.gif.
-----------
The second previous day is the Thursday. In this case the opening to close was 72 pips.
The importance of this day is 62.8% so we give the second previous day 45.2 pips in importance (0.618 * 72 = 44.496).
-----------
The third previous day is the Wednesday. In this case the opening to close was 104 pips.
The importance of this day is 50% so we give the second previous day 51 pips in importance (0.5 * 104 = 51).
-----------
The forth previous day is the Thu. In this case the opening to close was 85 pips.
The importance of this day is 38.2% so we give the second previous day 32.47 pips in importance (0.382 * 85 = 32.47).
-----------
The fifth previous day is the Mon. In this case the opening to close was 124 pips.
The importance of this day is 23.6% so we give the second previous day 29.264 pips in importance (0.236 * 124 = 29.264).
The first part of the calculation is now done. You now know the importance each day will have in pips on your trading day.
To sum it all up it looks like this.
1 – 98 Pips
2 – 44.496 Pips
3 – 51 Pips
4 – 32.47 Pips
5 – 29.264 Pips
We now need to calculate the average in pip.
(98 + 44.496 + 51 + 32.47 + 29.26) / 5 = 51,0452 Pips
This is the channel were the price will move until it breakout in some direction.
The line are drawed equal away from the price opening.
To make that happens you just take 51.0452 Pips divided by 2.
The results are: 25.5 Pips (use 26 Pips) above from the opening of the new day and below from the opening of the new day.
You should now have 2 lines drawned at your chart. One at 1.9606 and one at 1.9554.
You now have a 52 Pips channel.
I call this lines for the Break A, and Break B. Break A stands for Breakout Line Above, and Break B stands for Breakout Line Below.
Now we need only two more lines to have the setup done. This lines are the Break Stop H (Breakout Stop High) and Break Stop L (Breakout Stop Low).
These two lines are calculated in the EXACTLY the same way as we calculated the Break A and Break B –lines.
The only difference is that insteed of using the range in pips from the opening to the close that day we use the high and low of the exact same day.
Lets say that the sum up of this calculation would be as follow (Please remember that this is only hypotetical pips, opening and close and so on.):
1 – 164 Pips
2 – 93.5 Pips
3 – 72 Pips
4 – 67.8 Pips
5 – 42 Pips
The average in pips would then be as follow:
(164 + 93.5 + 72 + 67.8 + 42) / 5 = 87.86 Pips
Divide 87.86 by 2 and you will get: 43.93 = 44 Pips
Use this in the same way we did with Break A and Break B –lines.
i.e. You draw a line 44 Pips above AND below from the opening for the trading day.
You will now have all four lines.
Breakout Stop High at 1.9624
Breakout Line Aboveat 1.9606
Breakout Line Below at 1.9554
Breakout Stop Low at 1.9536
I have not the knowledge of how to program indicators, but I have a Excel doc. that I use to calculate these lines.
If some one wants to make a indicator… please be my quest. I would be very happy if someone would do it.
The set up is done… all you need to do now is use it correct….
How to trade the JL-Lines
Now you have the lines at your chart and are ready to trade it.
I will only describe how I trade it. I will not tell you how you should trade it. I believe that it is up to the trader himself how he/she wishes to use it.
I use 1H chart but you can use 4H, 30 Min, 15 min, 5 min and so on.
But remember that the lower timeframe you use the less importance it makes.
I only place trades at the close of a bar. Never before it close.
In my charts you will also see pivot points, yesterdays High - Low and Vegas tunnel lines. These are of course optional, but I like them there and I use them in my trading.
For some of you my stop loss might seem too tight, and that might be true. It is up to each one of you to have whatever money management as you like. The reason I use tight stop losses is that I rather take 5 days with small losses and one day with a very big profit then 5 medium losses and only one big profit.
But… I have never experienced big losses OR many days losing with this strategy.
So I guess that my stop loss rules might be a very good way to trade this strategy.
I have for the last 5 weeks made a profit of 843 pips. Not included the spread.
Different brokers use different spread so it is up to you to test this at your broker.
But if I would calculate the spread that I have on FX Solution it would be 843 – 125 = 718 Pips profit.
I have only trade this at GPB/USD. Mainly because the manually calculation takes some time to do.
Rules Long positions:
Go long if the candlestick close between Break A and Break Stop H.
Put stop loss at the opening price of the day.
*Or at Break B (read about that below).
When I gained 20 Pips I move my stop loss to the Break A line.
If the price continues in my favour I move my stop loss to the nearest line (JL-Lines, Pivot Lines, yesterdays high - low or Vegas lines) as soon as the price is 30 pips above the nearest line.
Never put a trade if the candlesticks opening moves from below the Break A to close above the Break Stop H.
Rules short positions:
Go short if the candlestick close between Break B and Break Stop L.
Put stop loss at the opening price of the day.
*Or at Break A (read about that below).
When I gained 20 Pips I move my stop loss to the Break B line.
If the price continues in my favour I move my stop loss to the nearest line (JL-Lines, Pivot Lines, yesterdays high - low or Vegas lines) as soon as the price is 30 pips below the nearest line.
Never put a trade if the candlesticks opening moves from above the Break B to close below the Break Stop L.
Special stop loss
If the channel is thinner than 40 pips i use the Break B line as stop loss nr.1 when i go long.
I use the Break A line as stop loss in a short trade if the channel is thinner then 40 pips.
Use a trailing stop loss I you prefer that.
Timeframes
Yes it work with weekly chart and monthly chart also. But you will need a much bigger stop loss.
If you use I at a week chart you need to calculate every weekly range from open – close and high – low in the same way as discibe above in “Theoretical Example”.
Then you need to take posistion at a daily chart or 4H chart.
If you use monthly chart you need to take positions at weekly or daily chart.
I never trade at this timeframe because I have not afford the stop loss.
My recommendation is to calculate the daily importance and take position at 1H charts.
Summary
Well that’s it… I hope you understand the system. I apologize if my spelling sometimes is very bad.
If someone wants to make a indicator I would be very thankful and happy.
If you have ant question at all just ask them. I will try to answer as fast and correct I can to help you out.
/ JoLimoney <STYLE type=text/css><!--td.attachrow{ font: normal 11px Verdana, Arial, Helvetica, sans-serif; color : #000000; border-color : #000000; }td.attachheader { font: normal 11px Verdana, Arial, Helvetica, sans-serif; color : #000000; border-color : #000000; background-color: #D1D7DC; }table.attachtable{ font: normal 12px Verdana, Arial, Helvetica, sans-serif; color : #000000; border-color : #000000;border-collapse : collapse; }--></STYLE>
(in english= Hey there Dennis)
: Don't belive there ever will be a holy graal.
I can't thank you enough... Thank you so very much making the indicator.