Forex trading strategy 15: GUPPY BURST

Best forex strategy for M5 with GDP/JPY

The first step in developing a mechanical trading system is to understand and describe market behavior. The next step is to figure out the rules for entries and exits. The guppy burst seeks to exploit trading profits when the market  is quiet.

There is  a window of around  three hours  between the  close of  the U.S.  market  and  the  opening  of  the  Asian  market.  The  forex  market  is relatively quiet during  this  time and  tends  to move  in a  gentle  yet predictable manner.

The market then springs to life again when the Asian market opens. The guppy burst seeks to identify the trading range during this 3-hour window and anticipate a potential breakout of the trading range.

To take full advantage of this potential breakout, I have selected one of the most volatile crosses, the GBP/JPY, commonly known as the guppy among forex traders.

Forex trading Time Frame

The guppy burst method works with the 5-minute candle (M5). This means that each candle represents 5 minutes of price movement.

Indicators

We use only pure price action; no indicators are used for this strategy.

 Currency Pairs

The guppy burst method applies only to the GBP/JPY.

 Forex Strategy Concept

After the trading range is identified, we place pending long and pending short orders. The entry price for the pending long is at the resistance level while the stop loss is located at the support level. The entry price for the pending short is at the support level while the stop loss is at the resistance level.

The profit target is set at twice the amount of the stop loss. As an example, if the stop loss is 50 pips from the entry price, the profit target will be 100 pips. This is a risk to reward ratio of 1:2.

Long Trade Setup for forex strategy

The reference candle for this strategy is the one that corresponds to 5 P.M.

New York time, which is the closing time of the U.S. market.

Here are the steps to execute the guppy burst strategy for long:

1. Identify the trading range in the first three hours after the U.S. market closes by referencing the highest high (resistance) and the lowest low (support) in these three hours. (See Figure 10.1.)
2. Place a pending buy stop order with entry price at the highest high (resistance).

Click here to see more.