Simple Breakout Forex Trading Strategy
This Is A Simple Breakout Forex Trading Strategy based on the GBPUSD forex pair.
This breakout strategy is designed to capture an early move of price when it is starting to establish its trend or market direction for the day.
Here’s what you need to do about trading timeframes:
- The Frakfurt Market Opens at 2:00 AM Eastern Standard Time (if 7:AM Gross Median Time)
- Then the London Market (the giant forex mover) opens an Hour later (8AM GMT).
This is the European forex session and forex market starts its day in Europe first.
Ideally, you’d want to trade only the GBPUSD pair in this one as this tends to have more volume when the London session opens.
Others may include EURGBP or any pairs that has a GBP in it.
You don’t need any forex indicators for this breakout system.
HOW TO TRADE SIMPLE FOREX BREAKOUT TRADING STRATEGY
Here’s how you trade this forex breakout trading strategy:
- Start with 1hr timeframe
- You need to find out the “price range” from 1:00 EST to 2:PM EST (This is the 1hr candlestick you should be looking for)
- Look for the highest high (peak) and the lowest low (bottom) of the price in that range.
- Then Draw parallel horizontal lines through those two price extremes-this will create a tunnel.
- Now switch to a 5minute chart and wait and watch to see if a 5min candlestick closes outside of the tunnel.
- If it closes above the highest high, you initiate a buy order
- If it closes below the lowest low, you initiate a a sell order.
- Buy order can be at market order or buy stop order. A sell order can be a market order or sell stop order.
- Place your stop loss at least 5 pips outside the tunnel (should not be exactly on the tunnel lines).
This chart below is the 1hr forex chart where you begin your trading analysis following the steps given above:
This 5 minute chart below is where you wait patiently to see any 5 minute candlestick breaks out of the tunnel and and if it closes above/below it, that’s when you enter a trade.
Pretty simple forex breakout trading strategy really. You just have to have the ability to use multi-time frame analysis and you’d be fine.
TAKE PROFIT TARGETS:
As usual, I would give you a couple of options:
- 3 times what you risked.
- if buy trade, set your Take Profit targets within the previous swing high (peak) or if sell then use a previous swing low point (bottom).
- move initial stop loss to break even when market moves by the amount risked and continue to trail stop it behind each new low peaks that form (for sell order) and higher bottoms that form (for buy order)
So there you have it…a simple forex breakout trading strategy. It’s pretty easy, isn’t it?
Its a simple n-period new high/low system. Trigger is making anew High/Low and hold until significant reversals are evident.AmiBroker Script:// #########################// Author Thomas Heyen// ER2 - 1min Chart Setup// #########################MArkethours = TimeNum()>=133000 AND TimeNum()<=154400;MarketClose= TimeNum()>=154444 AND TimeNum()<=240000;PositionSize = MarginDeposit = 1;P = Optimize("Periods",240,120,365,10); // 240 is perfectedge = Optimize("Edge",-70,-90,55,10); // -70 is best against my first guesstopband = HHV(C,P);botband = LLV(C,P);pos = (C-botband)/(topband-botband)*200-100;Buy = MArkethours AND Cross(pos,95);Sell = MArketclose OR Cross(edge,pos);Short = MArkethours AND Cross(-95,pos);Cover = MArketclose OR Cross(pos,-edge);Plot(pos,"channel",IIf(barssince(buy)<barssince(sell),colorgreen,IIf(barssince(short)<barssince(cover),colorRed,colorGrey40)),styleArea);// ##########################// Script End// ##########################I did include double Spread slippage ($20 per trade for ER2)and commission $2.50 for IB per trade. ($45 both ways)I end up with about 20-30% annual profit for the last 30 monthsmeasured at a 10K Budget with single contract trading.Without Slippage or only single spread slippage this improves greately.This all shows that proper MM and position scaling will also improve the performance.Note that trading starts in the afternoon!So it will perfectly combine with your morning trading.The 240 min (4 h's) period aligns perfectly with the 13:30 trading startto react to intraday new highs/lows.
1.Short term resistant is at a confluence of the $268 price level, of the 50 day SMA, and the 50 RSI. A close over this level gives a momentum long signal. 2.The RSI is at 49.24, a close over the 50 RSI is a sign of new momentum. 3.For the past four trading days the 10 day EMA has acted as short term support. A close under the 10 day EMA would open up the potential for a return to the 200 day SMA. 4.The 200 day SMA held on the first multiple tests of support. 5.A bullish cup pattern formed around the 200 day SMA. 6.The MACD is under a bullish crossover. 7.The trading range decreased last week as measured by the ATR. This is a bullish sign. 8.The $SPY rally to the 50 day last week was on very low volume. 9.Last week the $VIX trended lows to 17.41 with lower highs and lower lows. 10.The Syria bombing appears to be a non-event and the chart could play out bullishly. It is possible that a plunge Monday could be a buying opportunity. I am currently watching for key moving average crossovers to the long side for my watch list to enter this market, many are very close. A deep dip buy using oversold readings is my back up plan if I do not get a trend signal. Currently this market is in neutral zone and I am waiting for confirmation signals.
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