The Forex Chronicles

Opening Range Breakout Trade on GBP/USD – 21 September 2018

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Introduction

Opening range breakout trades can be some of the easiest and most profitable trades that you can make if you are a short-term day trader, particularly if you like to trade the main GBP and EUR pairs.

However this is not always the case. It all depends on the overnight trading range because the best set-ups will have a really narrow trading range (the smaller the better) because then there is much more potential for the price to move quite significantly when the markets open at around 8.00 AM local time.

In a perfect scenario, you will have a very small overnight trading range compared to the daily average true range (as indicated by the ATR indicator), and that’s exactly what we saw today with the GBP/USD pair.

GBP/USD Breakout Trade

It is only 9.30 AM in the UK at the time of writing this article, but the price has already moved enough to make a decent profit from this opening range breakout strategy.

GBPUSD Opening Range Breakout - 21 September 2018

In this example the overnight trading range of the GBP/USD pair was just 16.7 points between 00.00 and 7.00 AM, which is a fraction of the average daily trading range of 92.9 points.

Therefore when the price broke downwards out of this range just after 7.00 AM, this was a good opportunity to open a short position and trade the opening range breakout.

The best strategy is often to take a small profit when it presents itself with half your position, such as 10-20 points, for example, move your stop loss to break-even and then let the other half run for as long as possible, and this would have been a profitable strategy today.

As you can see from the chart above, the price has already moved more than 50 points from the closing price of the breakout candle (which is where most breakout traders would enter a position), and we are only a few hours into the trading session.

Closing Comments

The point of this article was simply to demonstrate how profitable it can be to trade opening range breakouts.

It’s not every day that you get the perfect set-up, even if you watch many of the major currency pairs, because the price will often have moved quite a lot already in the overnight session, but if you are patient enough to wait for the ideal set-ups when the overnight range is really small, you can potentially generate some excellent profits.

ThePipsMasterUK Trader Profile

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Who is ThePipsMaster UK?

ThePipsMasterUK is a trader from the UK who has successfully become one of the most profitable signal providers on ZuluTrade in recent months.

This particular trader is currently ranked 10th on ZuluTrade (as of 18 September 2018) out of the thousands of signal providers that offer their services on this site, and currently has more than 4400 subscribers following them who have chosen to trade their signals automatically in their own accounts.

This is largely because they have an overall success rate of around 98%, and have generated a total profit of 2867 pips in the 26 weeks that they have been trading.

I’m sure you will agree that this is an exceptional trading record, which is why I wanted to profile them on this site and keep an eye on their results in the future to see if they can keep up this impressive record.

Therefore I have included this widget that automatically displays their overall trading statistics in real time, and has links that will enable you to open an account with ZuluTrade and follow their signals yourself if you so wish:

Trading Performance Update (March 2019)

I originally said below that I worry that this type of trading strategy isn’t really sustainable in the long run because when you are targeting small gains every day and using significantly larger stop losses, it only needs one bad call to wipe out months of profits, and unfortunately that’s exactly what has happened in recent weeks.

After opening overnight long positions on the EUR/USD pair on 4/5 February, the price never hit his modest price targets and after the EUR/USD started to fall, he and his copiers have had to anxiously wait for a reversal for the last month or so.

ThePipsMasterUK advocates a stop loss of 150 points, but when the price looked like it was going to take out these stop losses, he made the costly mistake of extending the stop loss to 250 points for each position (which is never a good idea), and after another price fall, he has now closed all of his trades for a huge loss of 1337.9 points.

As you can imagine, this has devastated the accounts of both him and his thousands of copiers, and many people have understandably stopped copying him, despite the fact that he is still over 3000 pips in profit overall.

However the problem is his money management rules because unless he can find a way to tighten his stop losses and still make money in the long run, these blowouts will inevitably occur again in the future.

Trading Strategy

The signal providers on ZuluTrade don’t provide full details of their trading strategies because they could easily be copied by other traders, but they do tend to provide a brief overview of their strategies, and in this case ThePipsMasterUK has revealed that he is using an overnight trading strategy on the EUR/USD pair.

So in other words, they focus exclusively on this one pair, which is good because it means that they know exactly how this particular behaves, and they only ever trade this pair overnight when the markets are quieter, volatility is reduced and the price movements are more predictable.

Profit Targets

If you take a closer look at their trading history, you will notice that this strategy looks for small gains from every trade, generally between 6 and 10 pips, with up to 8 positions opened at any one time. Therefore if the trades are successful, you could expect to make up to 80 pips profit per day following this trader.

Stop Losses / Drawdown

ThePipsMasterUK uses an arbitrary stop loss of around 150 pips, but this is largely to enable the trades to hit their target price without being stopped out for a small loss each time.

In reality these stop losses are never hit based on their previous track record, and the maximum drawdown so far has been 481.3 pips with a worst trade of 85.2 pips.

However the big worry for me is that when you are using large stop losses and are only targeting small gains with a high success rate, it only needs one bad trade to wipe out several months profit.

So far it hasn’t happened (it has now – see update above), but I have been in this game long enough to know that a big hit is inevitably going to happen at some point using this type of strategy.

Final Thoughts

Overall I have to applaud this trader, and am happy to see a fellow Brit achieve such impressive results in the 26 weeks that they have been trading, but I do worry that this type of strategy might not be sustainable in the long run.

ThePipsMasterUK has a remarkable 98% success rate, which is almost unheard of in the forex industry, but to maintain this kind of record over long periods of time is exceptionally hard to do, no matter how good your strategy is.

I myself don’t follow this particular trader and would probably worry about incurring a big hit every time the price moves 20-30 pips in the wrong direction, which seems to happen quite often, which is why I would probably feel more confident following ThePipsMasterUK if he tightened his stop losses and maybe lengthened his profit targets.

However he has said himself that he has no intention of changing his strategy, which is fair enough. I just hope that he can continue his success because I have seen many profitable providers crash and burn on ZuluTrade, and it would only need one or two bad trades for the same thing to happen here.

Night Trading Strategy On The EUR/USD Pair

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Profitable ZuluTrade Traders / Strategies

It has often been the case that many of the top signal providers on ZuluTrade (and other sites) tend to trade various different currency pairs, and will generally trade during the busiest times of the day, ie the London and New York sessions.

So it is quite surprising to discover that one of the most profitable signal providers is actually using a night trading strategy on the EUR/USD pair because this pair doesn’t usually move a great deal during the quiet overnight session.

Any strategy that is used during this session has to capture lots of small gains in the region of 5-10 pips because of the low volatility, but this particular strategy appears to do just that.

ThePipsMasterUK’s Strategy

Unfortunately it is hard to find out the exact strategy that this trader is using, but if you visit their trader profile page, you can read more about it.

You will see that this trader uses a number of different filters to find possible entry points, and will often open several positions in order to catch the trend.

Indeed they will actually open up to a maximum of 8 positions (0.1 lots per trade) at any one time, so this is something to bear in mind if you decide to copy the signals of this trader in your own account.

Most interesting of all is that this trader specifically trades the overnight session to avoid the volatility of the daytime sessions, and only ever trades the EUR/USD pair, which is good because it means that they have learned the behaviour of this pair and know exactly how it is likely to move during this session.

This certainly seems to be a profitable strategy because most of their trades tend to be closed out for a profit of between 5 and 8 pips, on average, and the losses are generally very small on the rare occasions that they do experience a losing trade.

Trading Results

At the time of writing (23 August 2018), ThePipsMasterUK is currently ranked as the 9th best trader on ZuluTrade, and has a total profit of 2429 pips since they started trading in March 2018.

They have had 395 winning trades out of 402, which equates to a remarkable 98% success rate, with an average profit of 6 pips, a best trade of 34 pips and a worst trade of -58 pips.

It should be pointed out that this trader appears to use a maximum stop loss of around 150 pips, so I would imagine that big losses could occur from time to time, but nevertheless I think it will be interesting to keep an eye on the performance of this particular trader, and to see if their night trading strategy on the EUR/USD pair continues to yield results.

Here is a widget that displays the very latest trading results of ThePipsMasterUK:

If you would like to automatically trade the signals of this trader in your own trading account, or would like to open a free demo account with ZuluTrade, you can do so by clicking on the Follow or Register buttons above.

However please note that I am not recommending that you copy the signals of ThePipsMasterUK or any other signal provider. This blog post is designed to be used for educational purposes only, and does not represent financial advice. You are solely responsible for any trading decisions that you make.

Final Thoughts

The main point I want to get across is that you don’t necessarily need to come up with a strategy that looks to capitalize on large price swings or high volatility.

By trading the overnight sessions, you can trade at a more relaxed pace with reduced volatility and no market-moving news announcements to worry about, and the long-term success of this particular trader suggests that it is definitely possible to be successful by coming up with a night strategy that trades the EUR/USD pair, or any other major pair that has tight spreads.

US Crude Oil Closes Below EMA (200)

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Crude Oil Price Trend in 2018

If you have been following the price of US crude oil, you will have noticed that the price has been in a slight upward trend so far in 2018, going from around $60 per barrel at the start of the year to a peak of just over $74 per barrel at the start of July.

The price of Brent Crude has also been in a similar upward trend, rising from $67 to a peak of just over $80.

As a result of this, many of the large-cap oil stocks have seen their share price rise dramatically during this time.

Downward Trend in Summer

Since the price of crude oil peaked, it has since started to trend lower because we have seen a series of lower lows and lower highs.

This is relatively normal during the hot summer months because there is not the same demand, but from a trading perspective, it is interesting to look at the price chart to see if this is a temporary drawback, or the start of a more significant downward trend.

Price is Now Below EMA (200)

US Crude Oil Chart - August 2018

One key development is that the price of US Crude has just fallen below the 200-day exponential moving average (EMA (200)) on the long-term daily chart for the first time since September 2017, as shown in the chart above.

This is significant because this is a major indicator of the long-term trend, and is an indicator that is viewed with interest and acted upon by many traders.

So if the price continues to fall and establishes itself below this EMA (200) indicator, it could well be an opportunity to go short if there is a strong downward breakout.

Key Indicators of a Change in Trend

It is far too early to say for certain that US Crude is now in a bearish trend, and therefore likely to fall a lot further, just because it has closed below the EMA (200).

What we really need to see is a downward EMA crossover, where the EMA (20), EMA (50) and ultimately the EMA (100), all cross downwards through the EMA (200) because this will give a much stronger signal that a new bearish trend is emerging, and it is time to start looking for opportunities to open short positions.

It is also worth paying attention to the price of Brent Crude as well because if you look at this price chart, you will see that the price hasn’t yet closed below the EMA (200), but is very close to doing so.

Therefore if we do see downward EMA crossovers on both of these charts, this would suggest that the price of crude oil generally is entering a period of weakness, and is highly likely to continue falling.

Closing Comments

Even if we do see downward EMA crossovers, I still think it is highly unlikely that we will retest some of the previous lows of 2016, when the price of crude oil hit really did hit rock bottom, but I think a move towards $55 and possibly even $50 is certainly possible.

Either way, it will be interesting to see how the price reacts around these key levels because the EMA (200) is such a significant indicator in the world of trading.

We may find that this indicator acts as support and the price will eventually resume its upward trend, or at least stabilize between $65 and $70, but if we see further price falls, a big downward price move is definitely possible.

79% of IG’s Retail Investors Lose Money With Spread Bets and CFDs

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95% of Traders Lose Money – Fact or Fiction?

If you search online or read some of the forex trading forums, you will often hear people say that 95% of traders lose money, reconfirming the idea that it is very hard to make consistent profits from trading the financial markets.

This statistic was probably based on data from various different brokers originally, but the reality is that the percentage of profitable traders is possibly higher than 5%, as previously suggested.

IG’s New Disclaimer

Presumably as part of the the new ESMA rules and regulations, IG have revealed how many of their traders lose money trading spread bets and CFDs (contracts for difference).

In addition to pointing out the risks of trading spread bets and CFDs, they point out that:

“79% of retail investor accounts lose money when trading spread bets and CFDs with this provider.”

(correct at the time of writing – 6 Aug 2018)

IG.com Screenshot

My Own Thoughts

The first thing I would like to say is that I applaud IG for providing this information because it helps to provide complete transparency, and helps to build trust with both their existing customers and any prospective traders who are thinking about opening an account with them.

With regards to this 79% figure, I was actually very surprised because I have always believed that around 90-95% of traders lose money, based on my own previous experience and from reading industry statistics.

It is still difficult to know for sure because these figures may not be replicated across all brokers, and it may still be the case that only around 5% of traders make money on average across the entire industry.

However it should at least act as encouragement to know that 21% of traders with one particular spread betting and CFD provider are able to generate profits because this is quite a significant number.

UPDATE: IG and other brokers are now required to update this information in their disclaimer every 3 months, and so they now state that 81% of their traders lose money as of 12 February 2019. Nevertheless, this is still a lot less than the 95% figure that is so often quoted online.