Traders often look for trades which have a high probability of resulting in a strong trending move. These types of trades produce significantly higher returns within a very short amount of time. But how do we know if a trade setup has a high chance of resulting in a new trend?
Although there is no concrete way to know for sure if a trade will result in a trend, there are certain factors that increase the chance of getting in on a trending market. One of the factors would be to trade in the direction with least resistance. This means there are less hurdles that the trade should be going over, particularly supports or resistances.
Breakout strategies are very popular because it is one of the types of strategies that has a very high chance of turning into a trend. This is because after the breakout of a support or resistance line is cleared, often, there are no support or resistance left along the way which could hinder price from rallying or dropping.
Trend Prediction Breakout Forex Trading Strategy is a momentum breakout strategy that has a very high potential of resulting in a trend. It uses a technical indicator that automatically marks a support or resistance line.
Today Trend Prediction Indicator
Today Trend Prediction is an indicator that identifies the probable trading range of the market.
It then marks the price chart with two horizontal lines representing support and resistance line. During a trending market condition, price would typically range between the two lines. There are some cases when price could poke outside the range only to return between the range. However, in cases where the market starts to gain momentum, price would usually breach strongly outside the range and start a strong trend. Astute traders use this line as a breakout point taking trades in the direction of the breakout and ride the new trend.
This trading strategy is a breakout strategy based purely on the Today Trend Prediction Indicator.
To trade this strategy, traders should learn to observe how price reacts around the area of the support or resistance line. Traders should be on the look out for a strong momentum candle breaking beyond the support or resistance line. The candle should not be barely breaking beyond the line. Instead, the candle should close strongly beyond the support or resistance. If strong momentum is observed during the breakout, a trade setup up could be considered.
Trades are then kept open until the market shows signs of cooling down. To identify this phase, we will be using the 20-period Simple Moving Average (SMA). Trades will be closed only when a candle closes back on the 20 SMA line.
- 20 SMA (Gold)
- Todaytrendprediction (default setting)
Preferred Time Frame: 15-minute chart
Currency Pairs: major and minor pairs
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
- A bullish momentum candle should break above the resistance line.
- Option 1: Enter a buy order on the close of the candle.
- Option 2: Enter a buy stop order on the high of the candle and allow the next candle to break the high.
- Set the stop loss below the entry candle.
- Close the trade as soon as price closes below the 20 SMA line.
Sell Trade Setup
- A bearish momentum candle should break below the support line.
- Option 1: Enter a sell order on the close of the candle.
- Option 2: Enter a sell stop order on the low of the candle and allow the next candle to break the low.
- Set the stop loss above the entry candle.
- Close the trade as soon as price closes above the 20 SMA line.
This simple breakout trading strategy is one of the many types of support or resistance line breakout strategies. Such trading strategy could produce consistent results if paired with the right expectations and a sound trade management strategy.
This strategy uses the 20 SMA line to exit the trade in order to maximize profits and squeeze out as much profits as possible. However, there are variations of this strategy that uses a fixed profit target in to have a more consistent return. Some would set a target take profit of 20 pips while others would go as high as 50 pips. The drawback with this method is that different currency pairs have different volatility. Some pairs could easily achieve a 30 pip take profit while other pairs might find that too high.
Trade management is also paramount with these types of strategies. Some traders use a trailing stop loss based on the fractal of the candles as the market trends. Others have a systematic method to trail the stop loss to breakeven. Whichever method you would use would be fine.
Finally, this strategy should also be paired with a higher timeframe analysis. Breakouts should be anticipated in the direction of a higher timeframe trade direction thesis.
Master your reflex on momentum and breakouts and you could be on your way to profits.
Forex Trading Strategies Installation Instructions
This strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex strategy is to transform the accumulated history data and trading signals.
This strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this strategy accordingly.
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How to install this Forex Strategy?
- Download the zip file
- *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex strategy
- Right click on your trading chart and hover on “Template”
- Move right to select this strategy
- You will see the strategy setup is available on your Chart
*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.
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