Get A Free $50k Forex Trading Account. If you are looking for a Forex trading strategy which can make you big profits in around 15 minutes per day then, the strategy we will look at here is for you. Even better news is this trading method is very simple to understand and can be learned quickly, so lets take a look at it. If you want to make money in currency trading, you should focus on the big trends which last for many weeks or even months and if you do, you will spend less effort on your Forex trading strategy and make bigger profits. If you want to get in on all the big trends when the odds are on your side, there is a simple Forex trading strategy which will catch them all and its a breakout trading strategy.

If a currency is bullish it will start by breaking through overhead chart resistance and continue doing so, as the trend evolves and develops. You can look at a chart and see this is true in ANY currency pair, so if you buy breaks of valid resistance levels, not only will you have the odds on your side, you will make a lot of money. Obviously, not every breakout follows through in the direction of the break, so you need to decide the best breakouts to trade. The criteria for getting in on breakouts I use is – look for six or more tests before the break and check at least two of the tests, are spaced apart by at least six weeks. The more times a level has been tested and the further apart the tests are in terms of time, the higher the odds of the breakout being a good one. Another point to keep in mind is if you have a breakout to the upside and the news and other traders are bearish, the better the breakout is likely to be.

If you think about it this is logical – the majority of traders lose money, so being in the minority is good. Breakout trading can be learned by anyone and all you need to do is to look at chart resistance and use a few confirming indicators, to check price momentum is on your side and your all set for big gains with this Forex trading strategy. Many traders think the way to make money is to buy “low and sell high” but to buy a low, you need to predict where it might be and that’s doomed to failure. Breakout trading allows you to buy the move when its been confirmed with no guessing and is the method the professional traders use. So if you want to make money in Forex “buy high and sell higher” and you will make a great income in just 30 minutes a day or less.

Day Trading With Short Term Price Patterns and Opening Range Breakout

Learn forex day trading breakout system, as it is one of the most popular as well as reliable systems for trading in the forex market. To begin with, let us first try to have a clear understanding of what exactly we mean by day trading breakout?

What Is A Day Trading Breakout?

Well, breakout is a term used to refer to the movement in price that goes beyond the consolidated range of price. Breakout can happen either above the level of resistance or below the level of support.

Breakout is an indication that prices will possibly move in the same direction. If breakout happens to take place above the level of resistance, it is expected that the prices will shoot up and if the breakout occurs below the level of support, the prices are anticipated to go down. Breakout is one of the prime indicators to determine the pattern of day trading.

When Is The Best Time To Day Trade Breakout?

To learn forex day trading breakout system, you need to know the right time to day trade. In the normal course, there are 2-3 hours in every trading session in which you can day trade breakout and intra day trade effectively. The most suitable time to day trade breakout in the morning is between 9:45 am and 10:45 am and in the evening it is between 2 and 3:15 pm.

Follow a Couple of Tips to Find Some Good Breakout Trades

Do Not Indulge In Day Trading During Lunchtime

In the morning time, there is lot of movement going on in the forex market. There is everything from news to gossips to many other things that cause the swift movement of stocks. By afternoon, the traders take a pause to digest the various happenings of the day. This does not really mean that there is not even a single day trading breakout in the forex market but it’s just that the possibility of finding a good one is less. It is believed that lunch time is meant for accumulating the significant positions which can be considered at a later point of time. Usually, during the mid-day, the stocks undergo the procedure of breaking out again and again. This process is referred to as intraday accumulation.

Do Not Ever Trade In Stocks Less Than 30 Bucks in Value

Always remember if you trade in cheap stocks hoping that one day it will fetch you good returns, then there is hardly any possibility of such a thing to happen. There can be unpredictable swings in the movement of price, so it is better to play safe and trade in only those stocks that are more than 30 bucks in value.

Avoid Day Trading In Stocks That Move Down Or Up By More Than 5 Percent

It is not considered wise to trade on stocks the price fluctuation limit of which exceeds 5%.

The basic idea behind resorting to the day trading breakout system is to make money easily. So, learn forex breakout system and try your luck in day trading.

What is the 30 Minute Bias Indicator and how can I use it?
What is the Bias Indicator (BI)
The Bias Indicator is basically based on the share price opening range
We will investigate:
How to select stocks to trade
Entry tactics
Stop loss settings

The Bias Indicator is defined in terms of time and price. The time element is simply the first X number of minutes in the trading day. The number of minutes used to define the Bias Indicator is your decision as a trader. I define the Bias Indicator as the first 30 minutes of the trading day. I have found this period to work the best for my strategies that are geared towards day trading.

I will focus on the 30 minute BI because I think that this is the best time frame to use for Day trading. I believe that the market tends to experience a reversal period around 10:30 A.M., as many reports are released between about 9:30 A.M. and 10:30 A.M. Fund managers also seem to start their daily inputs around this time. So the 30 minute BI includes both of these factors.

The price component of the BI is the day’s trading range at the end of the BI time period. This means that the 30 minute BI is defined as the stock’s high and low for the day at 10:30 A.M.

The BI is not the opening price. In fact, the opening price is not a factor in calculating the BI. For example, if BHP were to open at $26.49 and then sell off to $26.06 at 10:15 AM and then reverse and rally to $26.86 at 10:30 A.M. the 30 minute BI would be the day’s range at 10:30 A.M. or $26.06 – $26.86. This is because during the 30 minute BI period $26.06 and $26.86 were BHP’s low and high, respectively.

Note: I said the day’s range at 10:30 A.M., not the range for the whole day.

The easiest way to mark the Bias Indicator Range is to use an intraday candle chart, set at 30 minutes interval. The first complete candle then gives you the Bias Indicator Range. Draw a line on top of the candle and one on the bottom of the candle and you have today’s BI marked on your chart.

As you can see, defining the BI is easy. The 30-minute BI is strictly the high and the low of the first 30 minutes of trading. I find that the BI often reveals the bias of a stock for the day.

Why is the Bias Indicator so powerful?

The fact that the BI is assessing such an informative period means that it can often determine the bias for the day as being bullish, bearish, or neutral. The BI represents how the bulls and bears establish their initial positions for the day. A move away from the BI indicates that one side is stronger than the other. A stock moving above the BI means the prevailing sentiment in the stock is bullish. The manner in which the stock breaks above and trades above the BI will indicate the strength of the bullish sentiment. The same but opposite analysis applies when a stock moves below its BI.

A move below the BI indicates that the stock is weak and the bears are in control.

How can we use the BI to help us in our day or short term trading?

The most basic application of the BI principle is that when a stock is trading above its Bias Indicator you should have a bullish bias, and when it is trading below its Bias Indicator you should have a bearish bias.

Trading any breakout from the BI breakout is a simple concept, but there are some considerations to take care of and a few tactical trading approaches to consider.

As discussed in creating a trading plan, before you enter a trade you must know your stop loss point. This is where you will exit the trade in the event that the stock moves against you. The loss that you expect to incur if you exit at your stop loss point is your “risk”. As discussed in money management, the position size is based on this risk calculation.

We have established a range of prices for a particular stock and have drawn the 2 lines on our chart. Of course you can use any good intraday chart, I find the IG Market charts the easiest to use.

Note: For the purpose of trading, I prefer to use a 5 minute chart.

Let us have a look at two practical trading approaches using the BI.

1. Buy the initial breakout
2. Buy the second breakout after a retracement.

What is a breakout? I define as a breakout when the whole 5 minute candle is above the upper line of the range.

First Approach: Buy initial breakout

Entering the market at this stage is the most aggressive approach because it does not allow for any form of confirmation that the stock’s break above the resistance level will continue. Perhaps this strategy should be reserved for the most promising stocks. However it has the advantage of providing, in many circumstances, the cheapest entry point.

Using this strategy, I would like to see the breakout accompanied with high volume, again on the 5 minute chart. The stop loss should be set at the lower line of the range, as drawn in after 30 minutes. I find it best to use an automatic stop loss, as this eliminates all emotions.

However many times you will find that using the 30-minute lower line will often define risk values which are too high. You may have a range of say one dollar, too high to get a decent risk/reward ratio. I this case I suggest you use a stop based on levels the market has defined for you, say a Moving Average level or a support level. If you can not find a stop level to give u a good enough risk/reward probability, it may be better to miss the trade and look for a better opportunity.

So to summarize the first approach:
Buy at initial breakout
Watch for volume
Set your stop loss
Pass the trade if the risk/reward ratio is not good enough.

Second Approach: Buy the second breakout after a retracement

This tactic may suit the more conservative trader. Here you have the opportunity to evaluate how well the stock broke out. You can see how the stock trades above the BI. When using this approach you are looking for the market to create a new breakout after a retracement. As soon as the market demonstrates that a new breakout occurs, you can buy the stock with a stop below that retracement level.

The advantage of waiting for confirmation and a retracement is that you have more information before you enter the trade. You will not get stopped out of a stock that fails immediately after it breaks out. The disadvantage is that not all breakouts retrace. You may of course miss the best opportunity that a particular stock has to offer that day.

There will be a lot of opportunities everyday. Be patient, and get in at the right time as determined by your risk. Don’t take trades late because you feel as though you are going to miss out.

Many times you will find that the stock retraces or moves along sideways until later in the day, then suddenly breaks out again and gives you a good trading opportunity, maybe during an afternoon rally.

To summarize the second approach:
Wait for initial breakout
Wait for retracement
Buy at second breakout
Be patient, often the second breakout happens later in the day.

If you have any questions so far, please do not hesitate to email me.
Email: ejk@tradingaustralianshares.com

Now we shall expand on this subject by looking at
1. selecting stocks to buy
2. refining the entry points
3. how to set stop losses

Ok, let us explore how to select stocks.

I suggest you create a watch list with all the stocks you may be interested in. You can explore many avenues to find interesting stocks.

Most CFD platforms will show you the most traded stocks for the day. It is always good to select stocks with high turnover. IG Markets has a daily listing of top movers, showing last price, % change and volume. This is a very informative source. If you open an account with IG Markets through my web site, I offer you 1 month free mentoring service to help you to get used to the platform and refine your trading skills.

You should also look out for recent news items. Recently I managed some good trades with Asciano, after reading a series of news about the company.

Select stocks with high volatility as these will give you the best chance to make a profit in day trading, but you must have a good stop loss. We discuss stop loss a little later. How do you define high volatility? Simply divide the daily average Trading Range (ATR) by the share price to get a percentage. The higher the percentage, the more volatility.

For example BHP s/p 26.4, ATR 2.02, volatility 7.65%.
AIO s/p 1.55, ATR .371, volatility 23.94%. A huge volatility, good chance to make profit, but dangerous without a good stop loss.

I made myself an excel table, where I can assess volatility quickly.

We should also look for a bullish signal. I always prefer stocks which trade at the same or slightly above the prior day’s close. The prior day’s high is often a potential area of resistance, so when the stock trades above this high it is a bullish signal.

To summarize selection of stocks:
Create a good watch list and check every day.
Scan news to find stocks in the news.
Use the listing of top movers or similar to check every day what is moving quickly.
Look for stocks which are above the prior day’s high. This is a bullish signal.

We said to buy the initial breakout or buy the second breakout after a retracement. When do we enter the trade?

Volume is one of the most important indicators to look for. A breakout with not much volume does not tell us much. If you wish to buy at the initial breakout, look for high volume to accompany this breakout. I also think it is a good idea to wait until a full 5 minute candle has settled above the top breakout line.

If the volume is not there, I rather wait for a retracement and buy on the second breakout.

Can we buy before the share price reaches the breakout point? In many instances we can, but ONLY if the volume increases. Sometimes you will have a high opening price, followed by a quick retracement. This will sometimes be followed by a quick upsurge with high volume. This can be a buy signal, but once again, we must be sure that the volume is strong.

As with any pattern analysis, you will not always find that all of the criteria are met. You must be able to identify quality trading opportunities based on your criteria and use the correct trading tactic to exploit the opportunity. For example, if a stock shows a bullish picture, has relative high volume and has good volatility, then it may be a candidate for a more aggressive strategy of buying the initial breakout.

If the stock does not show good volume or is below the prior day’s closing price, then you should be more cautious and wait for a second breakout.

Avoid stocks that don’t show an easily identifiable trading opportunity. There will always be other opportunities.

Setting a Stop Loss

Setting a stop loss is a MUST. Before you enter a trade you should know your stop loss point. This is the price at which you will exit the trade in the event that the stock moves against you before you are able to take your profits. The loss that you expect to incur if you exit at your stop loss point is your risk. The risk will define your position size.

The low of the BI range is the most logical area of resistance, therefore the point to set your stop loss. However I often find that this gives me too big a distance and my risk reward ratio is just not there. There are a few ways to raise your stop loss point and therefore reduce the risk and find trades with a better risk reward ratio.

I have on my charts 2 Exponential Moving Average (EMA) lines, one is 15 periods, and the other one is 7 periods. Remember, I use the 5 minute chart for my trading. The 15 EMA line is quite good to use, unless the share price really surges quickly. In that case I would use the 7 EMA. I always use a trailing stop loss to lock in profits, trailing it up every 5 minutes, of course never going backward.

Which method you use to set your stop loss will always depend on your risk tolerance.

Very often if my trade shows good profit after a steep rise, I exit once I see the chart flattening out. This helps me to exit with a decent profit, however many times I found that the share price retraces slightly, and then moves higher.

To summarize stop loss techniques:
The low of the BI range
The 15 EMA
The 7 EMA
Exit when the chart flattens out, if you are in good profit.

Remember, trading is 70 percent science and 30 percent art. You must use experience and intuition at all times. Most of all, you must be able to cope with some small losses.

Experiment with the Bias Indicator, you will find it profitable.

If you wish to subscribe to my fortnightly newsletter, please email me with the subject heading “newletter”.

Email: ejk@tradingaustralianshares.com

An opportunity for you
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I invite you to open an account with IG Markets through my web site and offer you a free one month membership of my unique mentoring program.
Go to my IG page, register with IG Markets and ask for a demo platform. Once you have opened the account and funded it, you will be invited to join my mentoring program for one month for free, absolutely no obligations.
Just email me on ejk@tradingaustralianshares.com with your details. Don’t miss this opportunity.

Happy Trading,

Eric

Author: Eric Kratzer
Article Source: EzineArticles.com
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