Price Breakout Strategy

 

Breakout trading means entering a violent trend in its early stages. The aim of this strategy is to take advantage of a major price move, and to trade it by being exposed to limited downside risk.

 

What is a Breakout?

A breakout means that the price of an asset starts to moves outside a defined price level. This price level may be a support or resistance level, a channel, a trend line, a Fibonacci level, a pivot point and etc. Breakouts are important because as they are followed by strong price swings.

But be aware that most of the times, breakouts are false. However, there are times when breakouts are real and then your positions can be really profitable.

 

Types of Price Breakouts

Price breakouts, in general, are divided in continuation and reversal breakouts:

(i) Continuation breakouts

(ii) Reversal breakouts

Continuation breakout

In the case of a continuation breakout, the price of an asset breaks an established price level (usually previous high) and continues to trend. The goal is to take your profit near the next local high. The longer the accumulation of prices before the breakout the stronger the breakout shall be.

Reversal breakout

The goal of trading reversal breakouts is to spot the last stage of an existing trend. The end of a trend usually occurs when the price has reached overbought levels or it has been stopped by an important support or resistance level. The aim for breakout traders is to get in at the early stages of this new trend. The reversal breakout trading is very difficult to prove profitable for inexperienced traders. The vast majority of reversal signals prove false.

The problem of lack of volume data

Stock traders know well that when you are trading stocks, breakouts must be accompanied by significantly increased volume. The problem in the Forex market is that traders do not have access to aggregate volume data. This is a disadvantage for Forex breakout traders.

 

False Breakouts and Conspiracy Theories

In general, a false breakout occurs when the price of an asset crosses through a major support or resistance level, but then the price suddenly retreats back.

There are many theories that Institutional Players (large investment Banks) are behind these false breakouts in order to push their clients to their stop-loss orders and make easy money. In any case, a false breakout means that the market does not respond as traders have anticipated.

 

Techniques for Avoiding False Breakouts

There are many ways to avoid false breakouts and to filter your trades. The disadvantage of filtering your trades is that you shall get in later than other breakout traders. The advantage is that will avoid at least 60% of all the false breakouts.

Here are some tips to avoid False Breakouts:

BEFORE THE BREAKOUT OCCURS

(1) Seek for Volatility. Volatile markets provide much more reliable breakouts. You can use ATR indicator on MT4 (Average True Range) or you can use an online tool seeking for high recent volatility:

http://www.myfxbook.com/forex-market/volatility

(2) Check for potential price patterns or price formations that may be formed.

(3) Confirm the new price momentum using a momentum indicator (i.e. MACD)

THE STOCHASTIC SCALPER TRADING STRATEGY

An easy-to-use scalping strategy that combines a SMA for trend identification and the Stochastic as a trigger. It can be used for trading any financial asset.


TRADING STRATEGY

Style: Scalping Strategy

Name: The Stochastic Scalper Trading Strategy

FINANCIAL ASSETS

Forex Majors | Metals and Energy | Stocks | Indices



TIMEFRAME

M5 timeframe (5-Minutes)

■ 10-15 daily trades



INDICATORS & SETUP

This strategy combines the Stochastic Indicator with a Simple Moving Average of 200 periods.

Stochastic Oscillator

-Settings at 10,3,3 instead of the standard setting (14,3,3)

Simple moving average (SMA) with settings:

-200 periods



TRADING SIGNALS

This is how you may implement the The Stochastic Scalper Strategy.

The 200 SMA is used as a simple tool of determining the master trend. If the price chart is above the 200 SMA then there is an Uptrend while if the price chart is below the 200 SMA then there is a Downtrend.

■ (↑) Long Trades

Each time the price of an asset is above the SMA 200 and the Stochastic is recovering from 20 you get a Long Trading Signal (buy the market).

■ (↓) Short Trades

Each time the price of an asset is below the SMA 200 and the Stochastic is falling from 80 you get a Short Trading Signal (sell the market).



TRADING ORDERS

■ Take Profit: 20-30 pips | ■ Stop-Loss: 20-30 pips | ■ Profit/Loss Ratio: 1

In the chart we have implemented this strategy on EURCAD but it is better to prefer currencies that are traded in narrower spreads.

CHART: The Stochastic Scalper

An easy-to-use scalping strategy that combines a SMA for trend identification and the Stochastic as a trigger


 

FXCC Forex Trading

 

FIND ALSO: ► EA BUILDER TESTER | ► GET STARTED WITH FOREX | ► TRADE SYSTEMS

STRATEGIES: ► DAY-TRADE | ► SWING-TRADE | ► SCALPING STRATEGY | ► BINARY STRATEGIES

FOREX RATINGS: ► DIRECTORY | ► TRADE SPREADS | ► FOREX REBATES | ► FOREX SCALPING | ► SWAP RATES | ► FUNDS SAFETY

 

 

■ The Stochastic Scalper Trading Strategy

ForexExperts.net ©

Forex Scalping means opening and closing many trading positions in a daily basis by targeting profits of a few pips (5-10 pips)

Introduction to Forex Scalping Trading Strategies

Forex Scalping means opening and closing many trading positions on a daily basis by targeting profits of a few pips (5-10 pips). These positions remain open usually for 1-2 minutes. Scalpers trade the 1-minute and 5-minute charts and usually prefer to trade exclusively two Forex Pairs (EURUSD and GBPUSD). The selection of one of these two pairs is crucial as these two pairs offer the narrowest spreads in the market (along with USDJPY). Scalping must be limited only in low-cost trading opportunities.

Scalpers can limit their trading cost by participating in a Free Forex Rebate Plan Information about the ForexExperts free Rebate Plans

Characteristics of a Forex Scalping Strategy

What characterizes all the following Forex scalping strategies is the great number of average trades per day but also the unorthodox Take Profit / Loss (P/L) Ratio. The Low P/L ratio means that the potential loss of each trade exceeds the potential profit. You can get 30-40 average trades and the P/L ratio is by rule less than 1. In order to prove profitable as a Scalper, you should enjoy a winning ratio of more than 65%. That means that out of 100 trades 65 must prove profitable while 35 can be unprofitable. This is a difficult task and therefore scalping is not suitable for all traders.

■ Daily Trades: 20 - 40

■ Profit/Loss Ratio: 0.5 - 0.7

■ Leverage: 1:100 – 1:200

■ Spreads: very important (max 1.5 pip)

■ Slippage: very important

■ Overnight Charges: No

■ Upcoming News: usually irrelevant (Scalpers avoid to trade 30 minutes before and after key news releases)

Forex scalping strategies can be manual or automated strategies. The automated Trading Strategies are applied by automated trading systems called Expert Advisors or Forex Robots.

You may Compare Expert Advisors here

Alternatively, you may scalp Forex by using manual commercial systems  Info about the EA Builder for MT4/MT5

These are some trading strategies for Forex scalpers.


Scalping Strategies

TRADING STRATEGIES

ASSET AND TIMEFRAME

INDICATORS AND SETUP

TAKE PROFIT AND STOP-LOSS

MORE INFO

HIT & RUN STRATEGY

■ M1 timeframe

■ Forex Currencies

 

■ 30 daily trades on average

Parabolic SAR (default) settings:

  1. Acceleration 2%
  2. Maximum Step 20%

Simple moving average (SMA):

50 periods

■ Take Profit:

8-10 pips

■ Stop-Loss:

12-15 pips

■ Profit/Loss Ratio: 0.65

Hit & Run Forex Strategy

BOLLINGER-RSI SCALPING STRATEGY

■ M1 time frame

■ Forex Currencies

 

■ 8-10 daily trades

Bollinger Bands

(i) 12 Periods

(ii) Deviations 2

(iii) Shift 0

RSI

The standard settings (14,9)

■ Take Profit:

5-7 pips

■ Stop-Loss:

10 pips

■ Profit/Loss Ratio: 0.5 / 0.7

Bollinger-RSI Scalping Strategy

THE STOCHASTIC SCALPER STRATEGY

■ M5 time frame

■ Forex Currencies

■ Volatile Commodities

■ Volatile Stocks and Indices

■ 10-15 daily trades

Stochastic Oscillator

Settings at 10,3,3

Simple moving average (SMA)

200 periods

■ Take Profit:

20-30 pips

■ Stop-Loss:

20-30 pips

■ Profit/Loss Ratio: 1

Stochastic Scalper Trading Strategy

 

BOLLINGER-RSI SCALPING STRATEGY

Trading the Forex Majors (preferably EURUSD and GBPUSD) using the Bollinger Bands and RSI.


TRADING STRATEGY

Style: Scalping Strategy

Name: Bollinger-RSI Scalping Strategy

FINANCIAL ASSETS

■ GBPUSD best (or EURUSD)

■ Use this strategy in other Forex assets given tight spreads in order not to disturb your P/L Ratio



TIMEFRAME

M1 timeframe (1-Minute)

■ 8-10 daily trades



INDICATORS & SETUP

This strategy is applied using the Bollinger Bands and RSI.

Setting the Bollinger Bands and RSI:

Bollinger Bands

Use the following settings:

(i) 12 Periods instead of the standard 20 periods

(ii) Deviations 2

(iii) Shift 0

RSI

-The standard settings (14,9)



TRADING SIGNALS

This is a simple scalping strategy combining two popular indicators:

■ (↑) Long Trades

When GBPUSD reaches the lower Bollinger Bands you prepare to trigger a Long (bullish) trade.

RSI-30 is the trigger for a Long Trade

■ (↓) Short Trades

On the contrary when GBPUSD reaches the upper Bollinger band you prepare to trigger a Short (bearish) trade.

RSI=70 is the trigger for a Short Trade



TRADING ORDERS

Here is how we set the Bollinger Scalping Strategy:

■ Take Profit: 5-7 pips | ■ Stop-Loss: 10 pips | ■ Profit/Loss Ratio: 0.5 / 0.7

 


CHART: Bollinger-RSI Scalping

Bollinger-RSI Scalping


 

 

  

FIND ALSO: ► EA BUILDER TESTER | ► GET STARTED WITH FOREX | ► TRADE SYSTEMS

STRATEGIES: ► DAY-TRADE | ► SWING-TRADE | ► SCALPING STRATEGY | ► BINARY STRATEGIES

FOREX RATINGS: ► DIRECTORY | ► TRADE SPREADS | ► FOREX REBATES | ► FOREX SCALPING | ► SWAP RATES | ► FUNDS SAFETY

 

Bollinger-RSI Scalping Strategy

ForexExperts.net ©

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