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Bubble breakout forex strategy

Almost every time that there is a bubble in the market, this forex strategy is able to jump in and take advantage of the price. It was tested on historical data since 2003, with positive results for multiple input variations. It achieved low drawdown while maximizing the profits.

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Once we observe a breakout of the bollinger bands tunnel, together with sufficient RSI oscillator momentum. Order is placed in the direction of breakout. Price moving rapidly in that direction will create a bubble (difference between average price and actual price). Eventually, average price will catch up to the bubble at which point we liquidate the position.

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Strategy goes for cases, when price moves too rapidly outside the tunnel for average price to catch up. The BB boundary that identified a breakout, will now serve as a gauge for trailing stop.

Even though strategy works with aggressive price movement, it is relatively conservative. Never allows opening more than one trade at the same timeand also using tight trailing stop with all the positions. Strategy was created by theforexkings, together with EA trading it. The EA will enable you to test is thoroughly and adapt it to the conditions of your choosing. Strategy can be also used for scalping.

Used tools and indicators

Bollinger bands (period 20, deviation 2). Breakout of BB tunnel will be our primary entry signal. Once we enter the position, same tunnel line that experienced a breakout will be now used for trailing stop loss placement. Adjust the BB deviation and period to modify the settings for different currency pairs and timeframes.

Relative strength index (RSI 20). RSI will confirm the signal by rising above 70 line for buy breakout and falling below 30 line for sell orders. Momentum sensitivity can be manipulated in inputs by adjusting buy above zone (70 line) and sell below zone (30 line). But the default setting works just fine.

Trailing stop: Position entry will trigger trailing stop use. Each position has a trailing stop that is adjusted with broken BB boundary. Trailing stop can be adjusted only in the direction of profits. It is never moved back with loss. additional distance of 100 pips is applied.

Forex strategy rules

SELL

Price breaking bellow bottom BB boundary. RSI falls below 30 line.

We will entr the trade short on new candle open.

Trailing stop is placed at the bottom BB and trailed down, protecting the profits after each candle close. This is the only way to close the position according to the strategy rules.

BUY

Price breaking above upper BB boundary. RSI rises above 70 line.

We will entr the trade long on new candle open.

Trailing stop is placed at the upper BB and trailed up, protecting the profits after each candle close. This is the only way to close the position according to the strategy rules.

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Disclaimer: Expert advisor was tested for profitability on historical data. All screen shots provided are displaying real results of the test. However past data will never guarantee future success. Every expert advisor needs to be tested properly on demo account. LIVE use only on your own risk. Read full disclaimer. TheForexKings Team does not give any financial advice. TheForexKings does not take any responsibility for any user’s investments and investment decisions. All rights reserved. Strictly for personal use.