2011 | FOREX

Triangle Breakout System

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Contents

Introduction ........................................................................................................ 5

Triangle Breakout System Overview ................................................................... 6

System Rules ....................................................................................................... 7

A Simple Way to Reduce False Breakout .......................................................... 22

Trade and Money Management ....................................................................... 24

About the Authors ............................................................................................ 25

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Introduction

I like this system very much and it is based on price movement. No indicator to

use and system works with all currency pairs in all time frames. You will be

shocked to learn how simple and powerful it is. But don’t let that fool you. It’s

not the holy grail, you will have loosing trades. And there is nothing we can do

about it!

This system is a breakout strategy. Forex trader is required to identify

symmetrical triangle patterns on the charts, verify the pattern is valid and start

placing your entry, stop loss and take profit levels. All of these important levels

are considered prior to making the trades.

This level will be shared with you and you will know the exact points to enter a

trade whether to buy or sell, and also the precise points to place your stop loss

and take profit levels. Next, you will watch me automate this entire trading

system with Forex Geometry System, leaving all of the trading and monitoring

work to the software to execute for me.

It will only take less

than 10 minutes a day

to set-up the system

and to review it after

the trading day ends.

Read on to watch the

step by steps to trading

this system…

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Triangle Breakout System Overview

This trading system focused on trading symmetrical triangle. It is a classical technical pattern known to many traders. Unfortunately trading this particular patterns and making trade entries are not easy. Employing the usage of Forex Geometry System (FGS), we can now easily trade symmetrical triangle pattern with just 10 minutes setting up per day.

Some background of symmetrical triangle from investopedia.com

“A chart pattern used in technical analysis that is easily recognized by the distinct shape created by two converging trendlines. The pattern is identified by drawing two trendlines that connect a series of sequentially lower peaks and a series of sequentially higher troughs. Both trendlines act as barriers that prevent the price from heading higher or lower, but once the price breaches one of these levels, a sharp movement often follows.”

Trading with Symmetrical Triangle

“A symmetrical triangle is generally regarded as a period of consolidation before the price moves beyond one of the identified trendlines. A break below the lower trendline is used by technical traders to signal a move lower, while a break above the upper trendline signals the beginning of a move upward. As you can see from the chart above, technical traders use a sharp increase in volume or any other available technical indicator to confirm a breakout beyond one of the trendlines.

The sharp price movement that often follows a breakout of this formation can be captured by traders who are able to identify the pattern early enough.”

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Market Traded

Mainly on Majors. However the method can be applied to any currency pair. Trade with currency pairs that have a spread not more than 7 pips.

Type of Trading System

Breakout Strategy

Charts

1 hour chart suggested. Don’t go below 15 minute unless you have traded this strategy for at least 2 months and is comfortable with intraday trading.

Charting Software

Use Forex Geometry System on Metatrader 4 Platform

Indicators

Drawing tools trend lines

Fibonacci Retracement Tool

Note: You may realize by now this is a very simple system. I don’t use any indicators except for support and resistance and price action. The simplicity of this system and the trade capability of Forex Geometry System will make trading this system a lot easier.

System Rules

Step 1

Look for symmetrical triangle pattern on the trading chart. The triangle formation can be quite difficult to analyze and the fact that a few different types of triangles exist doesn't make this task any easier.

It is my personal preference to trade only symmetrical triangle because I find the trading signal more reliable. It is my opinion and so I urge you to test out yourself. I may be wrong. Personally, I like the two trend lines to converge such that market will explode to the upside or downside.

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Furthermore a triangle is commonly recognized as a continuation or reversal

pattern. Whether the triangle is a continuation or reversal formation is not

important here. We will let market tells us what he thinks. By using FGS, we

can trade triangle patterns much easier.

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Step 2: Draw the Triangle

Connect the lower highs and higher lows to form the two converging trend

lines. The most important part is that the triangle should contain at least two

tops and two bottoms.

If you have 3 tops and 2 bottoms, or vice versa, it will still be a valid triangle

pattern. The more tops and bottoms you can connect them together, the

better is the triangle setup.

How to ensure you have identified a valid symmetrical triangle pattern?

I am sure you will have some difficulty at first. Not to worry. I have devised a

way so that you can confirm your triangle pattern is indeed a valid one by

performing the step below.

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Draw (1) line, connect the upper trend line and the lower trend line together

like the picture shown. Next, make sure that line 1 MUST NOT be longer than

line 2 (upper trend line) or line 3 (lower trend line).

If line 1 is longer than either line 2 or 3, the triangle pattern is not valid.

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Take a look at some examples:

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Step 3: Determine Entry Condition, Stop

loss and Take Profit Levels

We enter Buy order when price breakout from the upper trend line of the triangle.

And we enter Sell order when price breakout from the lower trend line of the triangle.

In order to determine the stop loss and take profit levels before we enter a trade, we will use Fibonacci retracement tool in Metatrader 4.

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Using the Fibonacci retracement tool, connect the 1st bottom with 2nd top for up-side breakout. Then the 0 level of Fibonacci should be on the bottom. And the 100 level is attached to the SECOND top. The correct setup should look like this:

Once, you have correctly placed Fibonacci retracement levels, determining your stop loss and take profit targets are simple.

Set stop loss at 0 Fibo level.

1st Take Profit Target at 161.8 Fibo Level (exit 50% of contract if using 2nd take profit target)

2nd Take Profit Target at 261.8 Fibo Level (optional)

Note: When 1st target is hit, shift stop loss to entry price plus 1 pip (stop loss to breakeven price plus 1 pip)

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Click Below to Watch How to Automate the Entire Trading System with FGS

http://www.forexgeometry.com/bft/go.php?xrGDYm8=

We will now look at the setup and run through the process again with a sell

setup.

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Click Below to Watch How to Automate the Entire Trading System with FGS

http://www.forexgeometry.com/bft/go.php?xrGDYm8=

Sell Breakout

1. Identify a valid symmetrical triangle pattern (line 1 must not be longer than

line2 and 3)

2. Insert Fibonacci retracement tool joining 1st top to 2nd bottom. ( 0 fibo level

must be at 1st top and 100 fibo level at 2nd bottom)

3. Set stop loss at 0 fibo level

4. Set 1st target at 161.8 fibo level, and set 2nd target at 261.8 fibo level (shift

stop loss to breakeven price when 1st target is hit)

5. Execute this breakout system with Forex Geometry System and software will

perform trade entry and exit on automation. (trading this pattern is just 10

minutes a day)

Note: See picture below.

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It’s simple, easy and VERY powerful. A common problem with most breakout

strategies has to cope with false breakout. I will share with you a simple way

to reduce false breakout and increase your winning percentage. Moving on…

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A Simple Way to Reduce False Breakout

False breakout can be reduced by introducing a trade filter. In my own research and trading experience, I discovered that a genuine breakout usually appear at least after 50 % of line 2 and line 3. If a breakout happened less than 50% of either line 2 or line 3, a false breakout is very likely to happen.

From the illustration above, the left triangle breakout point occur more than 50% of its set of line 2 and line 3. The right triangle has a break out point at less than 50% for line 2. You can easily program FGS to only make a trade entry by placing a vertical line at a future time in order to filter off trade breakout that occurred less than 50% of line 2 and line 3.

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Line 2 and line 3 must exceed 50% before you start trading triangle pattern

‘seriously.’ This trade filter can easily be introduced into FGS to trade this

pattern on fully automation. Trader will now spend just 10 minutes or less a

day, setting up the charts and incorporating it with the specified trade filter,

to allow FGS to trade on his/her behalf.

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Trade and Money Management

The maximum risk you should take in any trade should not exceed 2-5% of your account equity. I suggest for a start to risk 1-2% for beginning traders. When you are a new trader, it is not about making money yet, you need more time to hone your skills as a trader to win in the long run.

That is why I usually suggest that you risk 1-2% per trade for a start to get familiar with forex trading, Metatrader 4 and FGS. Before you start trading with real money, It is strongly recommended that you trade with a demo account for at least 3 months before you set foot on trading in a live account.

As soon as your 1st take profit target is hit, shift your stop loss to break even price to ensure it is a no-loss trade. Alternatively, some people like to use this method. Assuming you are risking 50pips, as soon as 50 pip is gained shift stop loss to break even price.

This way your protective stop will move to the breakeven level when/if the market moves halfway to your target. Now one of two things can happen, you can break even or take the full profit. That is a good position to be in and a great way to play the FX markets 24 hours a day.

This is a good and simple strategy for FGS traders. However, a good strategy will still experience losses. Stay vigilant and practice good money habits. If some trades result in loss, those losses have the potential to be recovered with other winning trades. If half or more of your trades result in loss, you need to analyze and adjust your Forex trading strategy.

Overexposing or underexposing your account can change the end result drastically and hence the first thing we need to do is to come up with the right size for our trades. Also remember that this is not a one time process, in fact it is an ongoing process because variables like account size, stop loss and pip value keep changing with time.

Finally you should never trade with money that you can’t afford to lose, as what it does is put pressure on you before you start and can cause you to make incorrect trading decisions.

Trade this System On Fully Automation with FGS

Click Below to Watch How to Automate the Entire Trading System with FGS

http://www.forexgeometry.com/bft/go.php?xrGDYm8=

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About the Authors

Co-Author Warren Seah

Since you may not know who I am, I thought it would be appropriate to introduce myself.

My name is Warren Seah.

I’m a trader, a system developer and tester, owns a software business and partly trades for a living. Trading is what I love, and this trading business is what I do as a profession.

I also enjoy teaching and helping other active traders get an edge. I know from personal experience how difficult it would be to get an edge in this business. Most traders give up simply because there are too much to learn in order to succeed in this business. Programming, computers, human psychology are knowledge one must know to get started.

But often, many were eluded by the quick profits and claim to-be the ‘holy grail’ systems out in the market. That is the point where they stop their pursuit for trading knowledge, always buying the next best trading system that should solve all their problems. Can success be bought? If success can be bought, many people will be rich today, don’t you think so?

It’s my mission to provide some form of trading edge and automation to fellow traders and soon-to- be successful traders. These tools are created such that they can be personally customized for every traders’ needs. They can be used and improved by yourself. These are tools if used can make your trading performance better than our trading results.

What my team and I have created are proprietary tools that we are proud of and we use them in our trading every day. That’s why you’re reading this report...I truly enjoy sharing what I know with traders who are just like me.

Regards,

Warren Seah and Forex Trailer Team

http://www.ForexGeometry.com

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