Powerful and accurate breakout system, effectively combining main features of standard breakout to create stable and robust trading strategy. It uses trend, volatility dependent tunnel, specific candle range and volumes to find the valid breakout entry. Once we enter the position it will be secured by employing break even function and possibility of using 50/50 targeting method.
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No matter what type of breakout you are looking for, it will always better If you decide to go with the flow – general market trend. Therefore, MACD histogram is used to determine its direction. To identify breakout, standard BB tunnel is used. Breakout candle must meet minimal criteria for candle body range and must be also confirmed by growing activity – volumes on closed candle.
After the entry, we will use our tunnel width to determine profit and loss targets. Target profit can be increased by using by increase target profit function available in expert settings.
Strategy was tested on historical data since 2003 using the expert advisor we have created (down below). Strategy produced some competitive results during the period of our test.
Used tools and indicators
Following settings have been used in historical data test of the strategy. Starting 2003, 1H tick data.
Moving averaged convergence divergence (MACD 500,250 just histogram). Histogram position compared to zero value will determine direction of main trend.
Bollinger bands (BB period 60, deviation 2) BB tunnel is drawn in the chart. We will be looking for a breakout in the direction of main trend. Breakout occurs on candle closing outside of tunnel boundaries while previous close occurred within the tunnel.
Breakout candle (min 40 pips, max 150 pips) Breakout candle must have minimum body range. We will also define its max range to avoid entering on ultra volatile candles.
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Break even function (60 pips). Stop loss is moved to break even position once the position reached predefined profit.
Stop loss target. Bollinger band opposing the Band that just got broken. Cannot be adjusted in expert inputs.
Increase Profit target (by 20 pips). Width of the tunnel at the moment of entry is the default profit target. To increase its value set the number of points you would like to add to it in this input.
Forex strategy rules
SELL
MACD histogram trending below zero.
Candle closing below bottom BB, while previous candle closed within the tunnel.
Conditions for candle: defined body range, volume value larger than on previous candle,
We enter the trade short on breakout candle close.
Stop loss: Placed at upper BB.
Take profit: Tunnel width at the moment of entry + increase profit target (points)
Break even: 60
BUY
MACD histogram trending above zero.
Candle closing above upper BB, while previous candle closed within the tunnel.
Conditions for candle: defined body range, volume value larger than on previous candle,
We enter the trade long on breakout candle close.
Stop loss: Placed at bottom BB.
Take profit: Tunnel width at the moment of entry + increase profit target (points)
Break even: 60
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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.
