The idea behind this Forex trading system was to capture an early move of the price when it start to establish its new direction or trend for the day.
We know that the Frankfurt market opens at 2:00 am EST (which is 7:00 am GMT), then an hour later the other giant - London market opens at 3:00 am EST (which is 8:00 am GMT). The European session is the first major session for each coming day.
So... what do we do ???
We start with 1 hour time frame, preferred pair - GBP/USD and no indicators. The price range we are going to focus on is from 1 : 00 am EST to 2 : 00 am EST. We look for the highest high and the lowest low of the price in that range and simply draw parallel horizontal lines through those extremes that will create a tunnel.
Now we are ready to move to a smaller time frame (5 minute chart) and watch for the whole 5 min candle to close outside the tunnel which will provide a signal for us to enter with the open of the next candle.
We use a 20 pip stop OR the other side of the tunnel - whichever is less.
We are aiming at least 20 pips profit.
After that we have several options:
We know that the Frankfurt market opens at 2:00 am EST (which is 7:00 am GMT), then an hour later the other giant - London market opens at 3:00 am EST (which is 8:00 am GMT). The European session is the first major session for each coming day.
So... what do we do ???
We start with 1 hour time frame, preferred pair - GBP/USD and no indicators. The price range we are going to focus on is from 1 : 00 am EST to 2 : 00 am EST. We look for the highest high and the lowest low of the price in that range and simply draw parallel horizontal lines through those extremes that will create a tunnel.
Now we are ready to move to a smaller time frame (5 minute chart) and watch for the whole 5 min candle to close outside the tunnel which will provide a signal for us to enter with the open of the next candle.
We use a 20 pip stop OR the other side of the tunnel - whichever is less.
We are aiming at least 20 pips profit.
After that we have several options:
- Lock the profit in,
- Start "chasing" the price with a trailing stop by placing the stop just below the lowest low of the previous 5 min candle,
- Or simply exit within the three consecutive hourly candles from the moment the trading order was filled.
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