Breakout signals are one of the most reliable opportunities to scalp in forex market. You never know how far will breakout travel. But you can be pretty certain, that the momentum of breakout will create opportunity to take home some scalping profit. With this time tested forex strategy, we will be looking for moderate scalping profit of 20 pips. Still in scalping range, but enough to cover all trading costs and generate profit. Stop loss is set with each trade in the form of trailing stop. Depending on the breakout signal, it can get very tight.
Strategy is based on one of the most reliable and widely accepted market principle of breakout. System was tested on wide data range of over 15 years with positive and accurate results (due to the testing model). Breakout Scanner EA was used for testing. This EA developed by our team is also suitable for optimization, testing and trading of this forex strategy (and hundreds of different strategies !).
Used tools and indicators
Strategy should be traded in 1H chart of EURUSD. It can be traded on any other pair as long as you optimize it (adjust the inputs accordingly using our Breakout Scanner EA).
MACD filter (slow 200, fast 150): Trend and momentum filter. histogram bar must grow in the direction of trend. Our entry must follow the trend and momentum identified by MACD.
Bollinger bands (period 60, deviation ). BB tunnel is used to identify breakout. Using the narrow tunnel enables more frequent signal in this forex strategy.
Size of the signal breakout candle (min 400 points, max 3000 points). Breakout candle must must be of defined size. We measure only the candle body. Breakout candle must also close outside the BB tunnel while previous candle close within our drawn narrow tunnel.
Breakout candle must surpass previous low/high in the direction of trend.
Volumes: We measure the tick volume to make sure that it is growing on breakout candle, compared to previous candle that closed within the tunnel. This will be our final breakout confirmation.
Trailing stop (extra deviation 300 points): Trailing stop is based on Bollinger Band that got broken by the breakout candle. Extra deviation is applied to put TS little further away from the current price at the moment of entry. TS will be adjusted only in the positive direction of winning trade.It will be adjusted with each candle close.
Take profit points (200). Take profit is placed immediately upon the entry on candle close Position is closed either on TS or by the TP.
Forex strategy rules Strategy was tested in 1H chart of EURUSD using Breakout Scanner EA.
SELL
MACD must close below zero. MACD histogram bar is taller than previous bar.
Breakout candle closed below the bottom bollinger band, while previous candle close occured within the bollinger bands tunnel.
Tick volume (volumes indicator) grows on breakout candle (compared to previous candle).
Breakout candle body meets criteria for min/max body size. Breakout candle must close below the low of previous candle.
We enter the trade short on breakout candle close.
We place TS at the Bollinger Band that just got broken (bottom) + extra deviation is applied above.
We close the position once price hits a TS or directly at target profit of 20 pips.
BUY
MACD must close above zero. MACD histogram bar is taller than previous bar.
Breakout candle closed above the upper bollinger band, while previous candle close occured within the bollinger bands tunnel.
Tick volume (volumes indicator) grows on breakout candle (compared to previous candle).
Breakout candle body meets criteria for min/max body size. Breakout candle must close above the high of previous candle.
We enter the trade long on breakout candle close.
We place TS at the Bollinger Band that just got broken (upper) - extra deviation is applied below.
We close the position once price hits a TS or directly at target profit of 20 pips.
Get MT4 expert advisor trading this forex strategy
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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.
