Breakouts in forex are never as straightforward as they might appear to the beginner. First of all, you never know If the line (zone) that got broker is considered important, not only by you, but also by the crowd of the traders and market makers. Another approach is to look for characteristics of the breakout anywhere above/below the standard tunnel. Once we identify the breakout candle, anywhere outside of the standard tunnel, we enter the trade as on breakout
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Again, this approach has some nuances to it. It requires trend identification and proper liquidation model. The forex strategy – breakout candle, offer solution to both of those problems. It was tested on historical data since 2003.
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Used tools and indicators
Commodity channel index (CCI 150) primary trend identification tools. It is important to identify general trend direction when trading breakouts. The added benefit of CCI or any other oscillator is the ability to separate the range by adding no trade zone (sell below/buy above levels - 0).
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Bolliger bands (BB period 60, deviation 2) widely used tool for tunnel drawing. It adapts to market volatility which is useful when using it as a lead for trailing stop. In this forex strategy, we will do just that.
Trailing stop (30 pips). Applied on BB line that just got broken. Line that got broken will turn from resistance to support, and from support to resistance. Therefore, it is logical and data proven that it works very well as a trailing stop lead. Additional distance can be applied.
Breakout candle signal. Candle with body larger than any of previous 3 candles. It also surpasses the low/high of last candle.
Forex strategy rules
CCI trending below the sell below zone – downtrend, downward momentum.
Price closing below the bottom bollinger band. It closes anywhere below the bottom band, with candle that is larger than any of previous 3 candles (compare body size).
It also closes below the low of previous candle.
We place trailing stop at bottom bollinger band and apply extra deviation 30 pips for trail stop. Position is closed only at trail stop.
CCI trending above the above zone – uptrend, upward momentum.
Price closing above the upper bollinger band. It closes anywhere above the upper band, with candle that is larger than any of previous 3 candles (compare body size).
It also closes above the high of previous candle.
We place trailing stop at upper bollinger band and apply extra deviation 30 pips for trail stop. Position is closed only at trail stop.
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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.