169
by Jedidiah
The 3 Step Breakout Strategy (adapted from dailyfx article)
Volatility breeds breakout trading opportunities.
24-period Donchian Channel on an Hourly chart can give us medium term trade entries.
Stops can be set opposite of the channel break using 1:2 risk and reward ratio.
Step 1: Look for Volatility
Not all market conditions are ripe for breakout trading. We need to first find the pairs that have shown the most volatility.
Step 2: Find Trade Entries Using Donchian (Price) Channels
Support and resistance levels are subjective and can vary from trader to trader. So to more clearly define our entry levels, we use Donchian Channels or Price Channels.
Step 3: Easy Exits Using Stops and Limits
No strategy is complete without an exit strategy. Fortunately, the Donchian Channel can assist in setting one up. We first want to focus on our stop. I recommend setting our stop loss beyond the other side of the channel. So if the price broke below the bottom line and created a sell trade, we would set our stop a few pips above the top line. If price broke above the top line and created a buy trade, we would set our stop a few pips below the bottom line.
Be patient therefore, brethren, until the coming of the Lord. Behold, the husbandman waiteth for the precious fruit of the earth: patiently bearing till he receive the early and latter rain.
Behold, we account them blessed who have endured. You have heard of the patience of Job, and you have seen the end of the Lord, that the Lord is merciful and compassionate.