Range Breakout Forex Strategy

Breakouts are areas where the price action has left the boundaries of consolidation to find new price direction.

Areas of consolidation are found where the price is basically heading sideways. However, this consolidation also creates a different kind of trading opportunity.

This opportunity exists within the boundaries marked by the indicator, as long as a breakout has not occurred.

Chart Setup

  • MetaTrader4 Indicators: Breakout-zones.ex4 indicator (default setting).
  • Preferred Time Frame(s):  1-Hour, 4 hours.
  • Recommended Trading Sessions: Any time. Depends on when the indicator signal appears on the chart.
  • Currency Pairs: any

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Download The Range Breakout Forex Strategy

Trade Example (click the image for full size):

sideways-breakout-forex-strategy

Strategy

Areas of consolidation regularly appear in the market. The Breakout-zones.ex4 indicator draws two horizontal trend lines to demarcate the boundaries of the consolidation area. The strategy is to trade off one price extreme to another.

In other words, the strategy is to buy at the lower trend line and sell at the upper trend line. This strategy hinges on the trader being able to recognize when a breakout has occurred or not.

LONG ENTRY RULES

A long position is initiated when the following is displayed on the chart:

  • Price touches or goes below the lower trend line but does not close below it.
  • Set the long entry at the open of the next candle. The previous candle must close fully so you are sure there is no breakout.

Stop Loss for Long Entry:

A few pips below the lower trend line once the bounce has occurred.

Exit Strategy/Take Profit for Long Entry:

  • The Take Profit is set at the upper trend line.

SHORT ENTRY RULES

To initiate a short entry, we do the following:

  • Price touches or goes above the upper trend line but does not close above it.
  • Set the short entry at the open of the next candle. The previous candle must close fully so you are sure there is no breakout.

Stop Loss for Long Entry:

A few pips above the upper trend line once the price has hit off the upper trend line.

Exit Strategy/Take Profit for Long Entry:

  • The Take Profit is set at the lower trend line.

Download

Download The Range Breakout Forex Strategy

About The Trading Indicator

The Breakout-zones.ex4 indicator is a simple indicator which helps the trader detect areas where price action works within a range. The trader can then trade off the extremes of the range as delineated by the red trend lines if the candles have not closed above the upper trend line or below the lower trend lines.

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