GBP/USD Trend Trading System explained

Transcription

1 Triad Trading Formula - GBP/USD Introduction Trend System GPB/USD Trend System GBP/USD Trend Trading System explained There are numerous ways to find and trade trends in the GBP/USD, but there is one system in particular I use that produces consistently great results. Now, if you ve read any of my other reports or trading systems, you ve no-doubt heard me preach that you should stay away from systems that only work in one pair. As a general rule I believe this is true, however I m breaking my own rule this time. Why? you ask... Well, for one the results are simply too good to ignore. But more importantly, the GPB/USD pair does seem to have its own personality, and in particular it tends to have larger than normal moves both within a session as well as with the overall trend. In this section, you will learn which indicator I use to trade the GBP/USD Trend System, as well as how to calculate the buys and sells by quickly looking at the chart. You ll learn all the details, including: WHEN to know it s time to enter a trade WHERE to place your stop losses to limit your risk as much as possible, and WHEN to exit a trade at just the right time to lock in your profits This technique is simple and straightforward, and you will be able to use it whether you are trading long or selling short. The first section will cover the indicator that I use to trade this system (and why it works as well as it does). The second section will cover the setup for both long and short trades. The third section will cover the entry for both a long and a short trade. The fourth section will cover the stop loss and the fifth section will cover the exit. So, with that brief introduction out of the way, let s get started Copyright ForexImpact.com 1

2 Indicators In the following section, we will cover how to use the price channel indicator to trade the GBP/USD trend trading system. You should have received the price channel indicator with the Triad Trading System, but I will still show you how to create the indicator by hand so you do not need the indicator itself to trade this system. Price Channel Indicator The famous Turtle Traders used the price channel indicator to determine breakouts of the last fifty-five and twenty days. We are going to use the same theory of the price channel only on a shorter time frame. We are going to use the high and low of the past five sessions. This price channel will determine our setup and entry. The example below shows a five period price channel indicator. Copyright ForexImpact.com 2

3 Upper Band of the Price Channel Indicator The upper band of the price channel tracks the highest high of the previous X number of days. In our case we are going to track the highest high of the previous 5 sessions. This indicator does lag by one column, but if it did not lag you would not be able to distinguish when a breakout to the upside occurs. A breakout of five sessions or more was chosen because it allows us to catch the strong up trends while staying out of the chop. Copyright ForexImpact.com 3

4 Lower Band of the Price Channel Indicator The lower band of the price channel indicator tracks the lowest low of the previous X number of days. We will be using sessions or days and the number of sessions/days that you will want to track is 5. The lower band lags one session just like the upper band, but this allows us to see when a breakout to the downside. Copyright ForexImpact.com 4

5 The Setup The setup for a Long Price Channel trade occurs when the price moves up to the highest high of the previous five sessions/days. The easiest way to calculate the highest high of the previous five sessions is to ignore the most current session, then draw a horizontal trend line from the highest high starting with the fifth session moving forward to the present session. Example of a Long Price Channel Setup: Copyright ForexImpact.com 5

6 Example of a Short Price Channel Setup: The setup for a Short Price Channel trade occurs when the price moves down to the lowest low of the previous five sessions/days. The easiest way to calculate the lowest low of the previous five sessions is to ignore the most current session, then draw a horizontal trend line from the lowest low starting with the fifth session moving forward to the present session. Copyright ForexImpact.com 6

7 The Entry Long Price Channel Entry The entry occurs when the price moves higher by one pip than the highest high of the previous five sessions/days. Example of a Long Price Channel Entry: Copyright ForexImpact.com 7

8 Short Price Channel Entry The entry occurs when the price moves lower by one pip than the lowest low of the previous five sessions/days. Example of a Short Price Channel Entry: Copyright ForexImpact.com 8

9 The Stop Loss Example of a Long Price Channel Stop Loss: The placement of the stop loss is 30 pips below the entry as shown below Copyright ForexImpact.com 9

10 Example of a Short Price Channel Stop Loss: The placement of the stop loss is 30 pips above the entry as shown below Copyright ForexImpact.com 10

11 The Exit The exit that we used is a 3 period high/low channel cross. The best way to visualize this is to plot two simple moving averages (SMA). For a long trade, plot a simple moving average of the high of the past 3 periods/days. For a short trade, plot a simple moving average of the low of the past 3 periods/days. Copyright ForexImpact.com 11

12 Long Exit Example of a Long Price Channel Exit: The exit for the five session price channel long breakout occurs when the high is lower than the SMA of the high of the past 3 sessions. Copyright ForexImpact.com 12

13 Short Exit Example of a Short Price Channel Exit: The exit for the five session price channel short breakout occurs when the low is higher than the SMA of the low of the past 3 sessions. Copyright ForexImpact.com 13

14 GPB/USD Trend System Trading Rules Long Trades Long Setup: We are looking for price to move right up to the upper band of the 5 period price channel indicator. Long Entry: Buy one pip above the upper band of the 5 period price channel. Long Stop Loss: Place a hard stop below the entry: 30 pips Long Exit: Sell at the close of the bar if the high falls below the 3 period SMA of the high. Short Trades Short Setup: We are looking for price to move right down to the lower band of the 5 period price channel indicator. Short Entry: Sell short one pip below the lower band of the 5 period price channel. Short Stop Loss: Place a hard stop below the entry: 30 pips Short Exit: Buy to cover at the close of the bar if the low is above the 3 period SMA of the low. Copyright ForexImpact.com 14

15 Trading GPB/USD Trend System: Long Example Long Setup We are looking for the price to move up to the 5 period upper band price channel for a long setup. The upper band is blue on the chart below. Copyright ForexImpact.com 15

16 Long Entry Once you have established that the setup has occurred, buy one pip above the 5 period upper band price channel. Copyright ForexImpact.com 16

17 Long Stop Loss Place a hard stop below the entry: 30 pips. The black line below the entry indicates the placement of our 30 pip stop loss. Copyright ForexImpact.com 17

18 Long Exit Sell at the close or open of next bar when the high is lower than the 3 period simple moving average of the high. The chart shows our setup, entry, stop loss, and the exit of the trade. In the example below the trade was closed at the next bars open, after the criteria for exiting was met. The 3 period SMA is shown in red on the chart below. Copyright ForexImpact.com 18

19 Trading GPB/USD Trend System: Short Example Short Setup We are looking for the price to move down to the 5 period lower band price channel for a short setup. The lower band is blue on the chart below. Copyright ForexImpact.com 19

20 Short Entry Once you have established that the setup has occurred, sell one pip below the 5 period lower band price channel. Copyright ForexImpact.com 20

21 Short Stop Loss Place a hard stop above the entry: 30 pips. The black line below the entry indicates the placement of our 30 pip stop loss. Copyright ForexImpact.com 21

22 Short Exit Buy to cover at the close or open of next bar when the low is higher than the 3 period simple moving average of the low. The chart shows our setup, entry, stop loss, and the exit of the trade. In the example below the trade was closed at the next bars open, after the criteria for exiting was met. The 3 period SMA is shown in red on the chart below. Copyright ForexImpact.com 22

23 Final Thoughts The GBP/USD Trend Trading System uses the large moves that occur in the GBP/USD, both within individual sessions and long term trends to allow you to profit. It also uses a time tested breakout entry system used by the Turtle Traders, the Price Channel Breakout, so the fundamental theory of the system is sound. This system uses a tight stop loss to preserve capital. The tight stop loss also allows you to use a smaller amount of money in your account. Or, you may choose to trade this with a non-correlated system using the same amount of money. Basically the stop loss gives you options with your money management. The exit is a quick trigger exit to preserve gains and get you out of the market if the direction changes so that you can be ready for another trade. The accuracy of this system is lower than other trend systems which I m sure will stop newer traders from trading this system. However, I would challenge you to trade this system in a demo-account or micro-account until you have the confidence that I have in this system. I believe that through trading this system you will become a better and more profitable trader, because it will force you to rely on a system that, while it isn t always the prettiest, is still HIGHLY PROFITABLE. I hope you ve enjoyed this report, and I sincerely hope you put the system you ve just learned into action. Copyright ForexImpact.com 23