Traders more skilled with breakout trading, will often approach it with one of the more advanced methods. Those methods will typically increase winning ratio or risk reward ratio. Sometimes both.
In the exchange they require extreme accuracy and precision. Some of them are hardly manageable by manual trading (MT4 breakout expert advisors).
Let's look at the few of more advanced trading methods that can be applied on breakout trading.
Scalping on breakout.
Once the price penetrates support/resistance zone it tends to go for at least few pips. Regardless if it is a fakeouts. Those sharp moves can be exploited by trader waiting for them. Trader will typically wait at the edges of price channel with pending orders. He will be looking tight profit of few pips (3 - 10). Stop loss placement depends on trading situation. At narrow channel, it can be placed at opposite side of a tunnel. Wider tunnel will require custom solution and traders discretion. Experience and testing comes into play.
Trader will typically place pending orders at respective price levels and leave the chart. This type of breakout trading is not time consuming. Risk reward ratio with this trading approach is rarely positive. Losing will happen and they will damaging to your account. Make sure that your money management takes that into consideration.
Multiple breakout entry with increased leverage.
This breakout trading approach, places stop loss of breakout order at opposite side of the tunnel. SL price will match entry price for a new order. New order will have doubled lot size and opposite direction (first order 0,1 LOT long, second order 0,2 lot short). Especially during the tight range, trader can switch direction multiple times, accept the loss few times. And still get out of the trade in overall profit. This limited martingale is useful in narrow range as we always accept the loss that equals the range width. Typically to use this method 1:1 risk reward ratio will be used.
Pyramiding the breakout entry (Traded by NEWS and breakouts MT4 EA)
Pyramiding (adding to the winner) is always praised as one of the most profitable money management methods in forex trading. The idea is simple. Once your breakout position reaches certain profit, you open the next trade in the same direction. Ideally you will be able to do so multiple times (10 - 20). Existing profits from opened position will enable you to open consecutive trades risk free (risking only the initial amount). This method attempts to win the jackpot by drastically increasing the position size, while keeping the risk in check. Risk reward ratio of 1:40 - 1:100 is not uncommon. Breakouts and especially those occurring during the news, present some of the best pyramiding scenarios occurring in forex market. This fact can be easily tracked by matching narrow trading range, with high impact news and consecutive price development.
Disadvantages : Trader will fail multiple entries before he successfully enters pyramiding trade . This can be demoralising. Mental fortitude is necessary to be able to go through losses and still stick to the system. Disadvantages: Once your entry fails multiple times, you possibly loss becomes too big. Knowing when to quit is crucial for this type of repeated entry.
