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The forex market is a constant battle between bulls and bears. There is wise saying that “Bulls make money, bears makes money but pigs are slaughtered”. If we do not implement strategic trading considering all the risks, having proper money management and mastering own psychology then the result will be obvious. I often note that in ranging market, one particular strategy always works. It is called “False breakout strategy”. In this article, I will illustrate how I used this strategy. False breakout strategy is based on the major support and resistance levels.
Time Frame and Currency Pair
The false breakout strategy can be implemented in any time frame and any pairs, but for this example, I took 4 hours candlestick chart on USD/SEK currency pairs. This means that each candle on the chart represents 4 H of price movement.
Strategy Concept
In ranging market, the price often reverse after an attempt of false breakout around the resistance or the support levels. This happens because of the buyers and sellers are in hesitant state of mind at tricky levels. (Figure 1 equilibrium condition). Figure 1. In ranging market, equilibrium condition prevai
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brilliant avatar
brilliant 25 Jan.

does it work with majors

Erka_shildeg avatar

Yes, it is the same

orto leave comments
In what, from a sentiment point of view, Stop Loss and Take profit are fundamentally different? The difference, in my opinion, lies in the fact that I WANT the Take Profit to be reached, while I DO NOT WANT that Stop Loss is reached. Ok, that's not a breaktrough, I know... Though, there is an important difference regarding the psichology that I use when I put pending orders, and the psichology that stays beneath the other traders behavior. So: if I want to use this substantial psychological difference to trade as a winner, how should I do? Let me explain with an example: if I do not want anyone to find out something, the easiest and most effective way is to put it where no one would ever think to look. A good choice would be a completely illogical place. Do you remember The Purloined Letter, the short tale written by E.A Poe? Something like that, I suppose. On the other side, if I want something to be found, I will put it where everyone thinks that it might reasonably be. So, that's the idea about how I think we should reconsider the most common Stop Loss and Take Profit positioning methods: 1) put the Take Profit where everyone puts it. (on a support, a resistance, a fibo retracem…
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SpecialFX avatar
SpecialFX 21 Feb.

Interesting approach to SL and TP :) I can see the logic in following your advice regarding SL, but there are also good reasons to place the stop loss where it is more logical from a market/trend point of view, even if that's where most people place it as well.

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Is forex trading really possible for everyone who is
interested in the currency market? Yes, it is. But you have to create a
specific trading strategy which is in line with other parts of your life, like
your job, activities and especially your family.
How to deal with forex market as an “ordinary” people
If you are not a professional full-time trader you
have to fulfill your daily work, so your timeframe to act on the forex market
will be relatively short in comparison to a professional trader, because you
are on work for about eight or more hours.
As I was a student, I traded a lot. It doesn’t matter
to me if there was on a daily chart, eight hour or five minutes timeframe. I
was using the “parabolic SAR” to place my stops, this means I had to adjust my
stop-loss every five minutes, half hour or whatever. Now I have to deal with a
job and this strategy isn’t working anymore, because it is impossible for me, to
trail the stops manually to the next point of the SAR.
The magic of trailing-stops
What is the advantage of trailing stops? Of course,
everyone knows that this little function turns your stop-loss-level in
direction of the market, when the mark…
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SpecialFX avatar

In my opinion, people with day jobs should stick to daily/weekly charts only, and adjust their stops at the end of the day. Problem solved :)

orto leave comments
We've all been there, you put on a trade and it shows you
some profit, then all of a sudden the spread widens considerably and your
stop-loss is hit, causing you to lose money. A few seconds later the spread
goes back to normal and the price quickly resumes its previous (profitable)
trend, but you no longer have a trade on.
Or you've placed a buy stop order to open a new position if
the price reaches x, it is triggered when the spread widens, but as soon as the volatility subsides the price returns to where it was before the chaos
started, ie. much lower than x, so you now have a losing trade on your hands.
                                    This trader lost a lot of money due to widening spreads...This article will show you how to avoid having
an opening or closing order prematurely filled, due to the spread widening
during important news or off market hours, using the different order types
provided by Dukascopy. ► Why do spreads widen/tighten?In a well-functioning financial market, where prices are
dictated by various market participants (and not by a single entity/market
maker), instruments do not have fixed bid/ask spreads. Usually, the higher the
liquidity, the lower the vola…
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SpecialFX avatar
SpecialFX 16 Aug.

But what happens if the price is 1.1971/72, some news comes out and the spread temporarily widens to 1.1961/82? Your stop would be filled at 1.1961. If you use the orders I recommend your stop will only be activated if the market actually reaches the price you indicated, because the more the spreads widen the less likely it is for the order to be filled. With the other orders the position can be filled at ''non-market'' prices during short periods of high volatility, because the more the spreads widen the more likely it is for the order to be filled :)

Myprox4x avatar
Myprox4x 20 Aug.

I learned few things from your article +1

scramble avatar
scramble 20 Aug.

yes right! indeed better follow your suggestions when using buy/sell stop orders or limit orders. can help a lot when market spikes!

MrSami avatar
MrSami 29 Aug.

nice.. good work.

berkek avatar
berkek 26 Mar.

This is by far the best article I have read in the community posts. Thanks for sharing.

orto leave comments
Reasons why some traders do not use Stop-Loss: I have mental Stop-Loss; I will exit my trades manually when it turns against me at certain pips. Price will come back, it happens in the past, and it certainly will happen again. I cannot let my broker see my stops, they would hunt it down.   Why mental Stop-Loss Fails Ok, let we look at some statistics first. Below is a table displaying the maximum pips range of four forex major pairs from the last 2,000 bars for 1 minute, 10 minutes, one hour, and 1-day time interval/period.  As you can see from the table above, price could move very far within very short period. Take EURUSD for example, could you react fast enough to exit manually when price move 59 pips in the wrong direction in just 1 minute? Remember when The Swiss National Bank decides to set a floor price of 1.20 Swiss francs to the euro to halt the continuing rise of its currency? How could you manually-exit your trade when price instantly jump after the announcement and end up 445 pips in just 10 minutes? Power failures, lost of internet connections, computer crashes are other reasons not to use mental Stop-Loss.    Waiting Price to Come BackM…
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adask avatar
adask 3 Oct.

I think it's a good article. First I read title and thought - this one is new to FX and will soon lose his equity. But it seems that article is great.

LinnuxFX avatar
LinnuxFX 3 Oct.

First you must find a good brokers, then you decide if you use SL or Not, if Not i think is too Risky... good article...

ritesh avatar
ritesh 12 Oct.

Good conclusion. Nicely written, quite detailed and informative article. Nice one..keep more coming. Best of luck and +1

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