This forex strategy is often used by professional traders to identify and follow the breakout occurring on envelopes tunnel. Its simplicity allows its use also by beginning traders. The rules are clearly stated with little, to no room for doubt or hesitation. Strategy was tested on over 13 years of historical data with positive results.
This forex strategy was tested on 1H chart of EUR USD since 2003 to end to 2017 with positive results. Envelopes Breakout Mastery MT4 expert advisor developed by TheForexKings team was used for historical testing. Same expert advisor can be used for testing,optimization and trading of this forex strategy for any other currency pair. Strategy is very prompt in detecting trend (momentum) reversals in the market. It doesn't use any lagging trend following indicator. Instead it relies on accuracy of breakout signal that will be confirmed by breakout candle, simple candle formation , volumes and market facilitation. Used tools and indicators
Strategy was tested in 1H chart of EURUSD.
Envelopes signal (period 40, deviation 0,2): We will be looking for breakout candle on envelopes tunnel.
Signal candle (breakout): Candle with defined body range (min 40 pips / max 150 pips) closing in the direction of trend (defined by filter). Candle must surpass previous low/high in the direction of trend. Previous close was within the envelopes tunnel.
Universal trailing stop: Placed on broken envelopes line with zero extra deviation. TS will be adjusted with each consecutive candle close, only in the direction of winning trade.
Volumes: Volume value of breakout candle must be larger than on previous candle.
Market facilitation by Bill Williams:MF increase factor is used to define how much should MF grow on signal candle compared to previous candle.MF increase factor (2): Defines how much should MF increase compared to previous candle. Calculation: (MF on previous candle* MF increase factor must be less than MF on last closed - signal candle).
MAX number of trades opened simultaneously per side: 1
Rules of the forex strategy SELL
Breakout candle closing below the bottom envelopes line. Previous candle close was within the tunnel. Volumes on signal candle is larger than on previous candle. Body of signal candle meets criteria for minimum/max size. Breakout candle closes below the low of previous candle, with volume larger than on previous candle. MF on signal candle is larger than MF on previous candle* MF increase factor (2) We enter the trade short on new candle open. We place TS at the bottom envelopes line. Position can only be closed by TS. BUY
Breakout candle closing above the upper envelopes line. Previous candle close was within the tunnel. Volumes on signal candle is larger than on previous candle. Body of signal candle meets criteria for minimum/max size. Breakout candle closes above the high of previous candle, with volume larger than on previous candle. MF on signal candle is larger than MF on previous candle* MF increase factor (2) We enter the trade long on new candle open. We place TS at the upper envelopes line. Position can only be closed by TS.
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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.