4h time frame is perfect when trading breakouts. Signals are relatively frequent but even more reliable than in lower time frames. Extra distance between the signal and trailing stop allows following the major trends for longer time. We will stay in the winning trade much longer than in the losing one. This conservative breakout strategy can be therefore applied in 4h chart of multiple instruments simultaneously.
Forex strategy was tested using Breakout Scanner EA. This expert advisor is suitable for testing, optimization and trading of this many more breakout strategies.
Used tools and indicators Apply in 4H chart of EURUSD. Optimize before using this forex strategy on other currency pairs or timeframes. we have used New York close in all our tests.
MACD filter (slow 600, fast 50): we define trend and momentum in 4H chart. Entry must follow this general market flow.
Bollinger bands (period 60, deviation 1 ). BB tunnel is used to identify breakout.
Size of the signal breakout candle (min 800 points, max 3000 points). Breakout candle is defined by size of its body. Candle must close outside of BB tunnel in the direction of trend , while previous candle closed within the tunnel Breakout candle must surpass previous low/high in the direction of trend.
Volumes: Volume grows on breakout candle compared to previous candle.
Trailing stop (extra deviation 600 points): TS is based on broken bollinger band. Extra deviation is applied to improve trend following ability of the system. TS will be the only method of position liquidation. Ts is adjusted with each candle close only in the direction of winning trade.
Forex strategy rules Apply in 4H chart of EURUSD. Use Breakout Scanner EA for automated trading. Please not that tested chart use New York close.
SELL
MACD histogram is closing below zero. MACD bar closing lower than previous bar.
Breakout candle closed below BB tunnel, while previous candle closed within the BB.
Breakout candle body is larger than minimum body size and smaller that max body size. Breakout candle must also close below the low of previous candle.
Volumes must grow on breakout candle (compared to previous candle).
We enter the trade short on close of breakout candle (new candle open).
We place TS according to bottom Bollinger Band and apply extra deviation to put it further from the price,
We close the position once price hits the TS.
BUY
MACD histogram is closing above zero. MACD bar closing higher than previous bar.
Breakout candle closed above BB tunnel, while previous candle closed within the BB.
Breakout candle body is larger than minimum body size and smaller that max body size. Breakout candle must also close above the high of previous candle.
Volumes must grow on breakout candle (compared to previous candle).
We enter the trade long on close of breakout candle (new candle open).
We place TS according to upper Bollinger Band and apply extra deviation to put it further from the price,
We close the position once price hits the 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.
