12# SRDC Method Level III Trading System
SRDC Forex Trading Method: Box Breakout
Submit by janusTrader (write by Orange Roshan)
Attack of the box
Box trading is a very profitable method of capturing breakouts and filtering whipsaws. Its been used by many institutional traders all over the financial market. One of the most
famous breakout system is the Big Ben strategy.
It took advantage of activities made by the London Open. Another one worth mentioning is called “Trading the box”. Its a system devised to capture the NY session made popular by Rob Booker. An outstanding Star Wars fan, just like me!! LOL.
In this episode, I will try to make it as simple as possible, however I must warned
JajaBinks and Grandmas that this method is a little more complicated than the method
deployed in Episode One.
I will be covering the basic system, entry and exit, and of course how to filter bad trades using Episode I and II.
This system is not as powerful as The next Episodes but
neithertheless, it can easily harvest 20pips or more. Therefore, diapers (some pee in their
pants) and knee caps (will not cause you to fall off your chair) will not be necessary.
THE BASIC SYSTEM
Create a box from 00:00GMT until 08:00GMT. Basically, drawing a horizontal line from
the highest and lowest of the eight hours candles. In plain english, a good trade will
happen should it breakout from this box. The reason, as Frankfurt and London opens,
activities will move the candle outside the box and formed a new trend either upwards
and downwards.
Here is an example on my 1hr chart GBPUSD
However, entries are done using the 15mins candles. The reason is obvious. My
neighbour has a lion for his pet and I only have a cat. You don’t get it? Its ok, it has
nothing to do with this Episode.
The 15mins candles can detect a breakout early just in case we have a sudden move
which could be a very long candle in the case of a 1hour candle. Below is an example of
the same 1hr chart but shown in 15mins time frame.
Entering a trade
There are many ways to cook a monster Crab. You could BBQ it, steam, simmer or even
fry it. I prefer steaming it. The flesh is soooo juicy and fresh. Just the thought of it, make me fly to Alaska and order some.
Anyway, same with the box. We could have many entry styles. The one that I will
mentioned here is using price actions.
ONE:
Trade the direction of the breakout as soon as it penetrate the box.
TWO
Trade the direction of the breakout at the opening of a new candle after the box is
penetrated (provided its outside the box, Daaa…..). The BLUE arrow below.
THREE:
Wait until a full formation 15mins candle finish forming. The pinkish Red arrow below
For programmers, I will help you a bit here. A full formation candle is when the LOW of
a candle is > than the top box or when the HIGH of a candle is < the bottom box.
Then enter at the opening of the next candle, following the direction of the breakout. Just
like the SRDC I basic and advance entry rules. The Orange arrow. Anyway, here is an
example:
In the pictures SRDC Method Level III forex system in action.
Exiting the trade
The Take Profit is up to you. However from experience 20pips is easy, 40pips is sweet
and at times, even 100pips. Knowing the GBPUSD range will be helpful. You takeprofit
can be:
RANGE – BOXSIZE
And traillock can be 2/3 of the above value.
A good exit strategy would also be at 17:00GMT or 16:00GMT, which is London close
depending on daylight saving.
Trading Episode III using Episode I (Filter)
Many times, the box exceeded the Support and Resistence of yesterday’s High and Low.
This may be due to the strong move from the Frankfurt open, which is one hour before
the London session opens.
Well, in this case, you can use yesterday’s Support and Resistence as you part of your
box. Should the breakout occurs on the S&R, you can initiate 2 trades at once, and this is
usually a profitable move. In another words, S&R is more powerful than the EIII box.
Share your opinion, can help everyone to understand the forex strategy.
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