This system is a breakout system. We are going to use trend lines and Fibonacci levels.
We are not going to waste our time predicting the trend. Instead, we are going to follow the trend and wait for price to move and confirm our signals before we enter the market.
Trend lines simply represent the direction of the market.
In up trends, the line should be drawn below the price. Connecting at least 2 lowest lows. The more lowest lows and higher highs the trend creates, the more valid – powerful – it becomes.
In down trends, the line should be drawn above the price. Connecting at least 2 lower highs. The more lower highs and lower lows the trend creates, the more valid – powerful – it becomes.
Up trend
Down trend
Trend line Breakout
There are two kinds of trend lines that we are going to use with this system. Main trends small trends.
The main trend line, should represents main direction of price. While the smaller trend should represents the minor – inner – trend, going in the opposite direction of the main trend. By inner trend I mean, a smaller trend within the main big trend.
Let‘s see how that looks like on the chart ( EUR/USD – 4H )
Long Entry:
1 – Main Trend is Up
2 – Inner Trend is Down
3 – Breakout in the direction of the main trend
Attach Fibonacci levels to the last wave, 0 level on the low and level 100 on the high.
Entry level = Fibonacci level 100
Stop loss level = Fibonacci level 0
Targets = Fibonacci levels 161 – 261 and 423
Short Entry
1 – Main Trend is Down
2 – Inner Trend is Up
3 – Breakout in the direction of the main trend
Attach Fibonacci levels to the last wave, 0 level on the high and level 100 on the low.
Entry level = Fibonacci level 100
Stop loss level = Fibonacci level 0
Targets = Fibonacci levels 161 – 261 and 423
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