Trading strategy for breaking through support or resistance levels
If you look at any of the charts of a currency pair, you will immediately notice that the price of this instrument does not move in a straight line.
In its movement, you can clearly determine the minimums and maximums, which will serve as the basis for the Forex breakout strategy.
The level breakout strategy involves overcoming price boundaries, which are best used as support and resistance lines.
The channel forex indicator is ideal for building them .
Its convenience lies in the fact that it immediately builds a line of support and resistance on several time periods and you can easily find points for placing orders, regardless of which time frame you are working on.
In the same case, if you build these levels manually, it is very difficult for them to coincide on several time frames selected for analysis.
And it’s always easier to automate graphic constructions than to do it manually.
The level breakout strategy can be used by placing both regular and pending Forex orders. Pending orders are even more beneficial in this case, as you don't need to be constantly in front of the trader's trading terminal, and all necessary stops can be set in advance.
The essence of the strategy is to detect a breakout of the price channel in time and open a position in the desired direction, while keeping in mind that the breakout itself can occur either in the direction of the main trend or against it.
This trading option works especially well in a flat , when the price forms a narrow price corridor and any intersection of support or resistance lines will indicate the beginning of a new trend.
Key points of the level breakout strategy using a specific example
1. Choose a currency pair with a clearly defined price range, meaning the price chart should show both ups and downs. The more horizontal the trend, the greater the likelihood of making a significant profit.
2. Download and install the channel forex indicator .
3. Determine the order placement level; it should be at least 10 points below the support or resistance line. If desired, you can place pending orders in both directions.
If you prefer to constantly monitor your trading, simply open a trade as soon as the price crosses one of the levels and moves further. The key is to take your time and wait until the trend moves at least 10 pips from the set level. This approach will help filter out false signals.
4. Stops – when placing orders, we set a stop-loss and, if desired, a take-profit. We determine the stop-loss level depending on the trading timeframe and the magnitude of the pullbacks within it.
Or we place it before the boundary of the level whose breakout we are counting on, that is, if a false breakout occurs and the price returns to the channel boundaries, the mistakenly opened order will be closed by a stop loss and reduce potential losses.
5. The deal is closed when the take profit and at your discretion.
Trading strategies based on level breakouts are highly effective; experience shows that almost 70% of trades, when used correctly, close profitably. The speed of price movement after a level breakout also plays a significant role, as this moment also serves as confirmation of the trend's continuation.
You will find another version of the strategy for breaking levels here - http://time-forex.com/strategy/proboynay-strategiy , so to speak, its more recent version.
