Trading Breakouts is one of the oldest (and arguably most successful) trading strategies around. In fact it forms the basis of most tactical entries employed by modern trading strategies.
What are Breakouts and how should we trade them?
Breakout happens when price moves outside an established trading range/ technical patterns. This means a break of support/resistance levels. As there isn’t any “obstruction” after the break of the support/resistance levels, price usually follows through strongly, giving traders who entered at the initial breakout a handsome profit. In many cases, the breakout also signals the beginning/continuation of a trend move.
Now that you understand what a breakout is, let us go through the components in the dashboard interface and what they meant.
The Timeframes are listed at the top horizontal row and the Pairs are listed in the left vertical column.
The symbols and boxes in the dashboard means:
Buy (Initial Break Up)
Price has just broken the top resistance channel line. Buy now!
Sell (Initial Break down)
Price has just broken the bottom support channel line. Sell now!
Continued Break up
Price has already broken up previously and is currently still breaking up (Creating new local high price). Risk of price retracing is high. However upward momentum of price is strong. Set a tighter stop if you are buying now or wait for a retracement entry.
If you are already in a long trade, stay with it.
Continued Break down
Price has already broken down previously and is currently still breaking down (Creating new local low price). Risk of price retracing is high. However downward momentum of price is strong. Set a tighter stop if you are selling now or wait for a retracement entry.
If you are already in a short trade, stay with it.
No Signal
Price is not making new high/low. Do nothing.
The rules for using FX Breakout Radar are simple.
Buy when you see the breakup BUY signal and sell when you see the breakdown SELL signal. (For advance traders, who wants to wait for a retracement before entering on the signal, it is possible but you might end up missing trades altogether. Back-testing had been done and it is advised to take the signal once it appears)
When price has broken out recently and is currently still making new high/low, the CONTINUED BREAKUP/DOWN signals are shown. This is to help you monitor the momentum of the breakouts after entering on the initial BUY/SELL signals. If price continues to break up/down, the momentum is strong and you should stay with the trade. If it changes from BUY/CONTINUED BREAKUP to NO SIGNAL or from SELL/CONTINUED BREAKDOWN to NO SIGNAL, price momentum is waning. A retracement is taking place and it could also signify a false breakout.
Signals appearing in multiple timeframes
If there is a breakout in the lower timeframe chart for the pair you are trading, it is signaling a potential breakout in the current timeframe.
If there is a breakout in the current timeframe chart for the pair you are trading and there is also a breakout in the higher timeframe chart, the breakout is strong as a higher level support/resistance level is being taken out. This is a high probability trade!
Confirmation on Bar Close
There are different interpretations on what constitute a breakout. Should a spike up within the current bar be considered a breakup or should price close above/below the breakout level for the current bar for it to be considered a breakout?
To wait for price to close above/below the breakout level is a firmer confirmation of price breaking out. However there is risk of price running too far away from the breakout level if you wait to enter on the next bar.
We leave this option to you and you can set which type of signal you want to receive in FX Breakout Radar.
Where to set Stop Losses?
There are many methods for setting stop losses. In fact, not setting a stop loss level should also be taken into consideration! Back-testing has been done and the result is best for the case where there is no stop loss. However the drawdown for not setting stop losses might be too great for most traders to handle.
Here are a few methods for setting the stops which we have tested successfully.
1. Stop Loss – Swing Points
A break of the previous swing point likely means that the breakout is a failed attempt.
2. Stop Loss – Opposite ends of Donchian Channel
A Donchian Channel marks the highest high/lowest low of the previous X periods. It changes with time so your stop loss will move as well. Notice that the stop loss level for the Donchian Channel is similar to the Swing Point’s stop loss level.
3. Stop Loss – Moving Average Crossover
A fast moving average crossing over a slow moving average signifies a change in the current direction of price movement. This has been used many professionals as a signal for exiting their trade. Notice that for this method, you do not know where your stop loss level is until the moving averages crosses.
Email Alert
In addition to watching the dashboard, FX Breakout Radar provides Email alert for the desktop version. The program will email you immediately when there are new signals. You will only need to monitor your mailbox to trade!
Pop-up Window Alert
The pop-up window alert is similar to the Email alert. On new signals, the program will display a pop-up window on your screen. You can be working on other things and be alerted immediately when new signals arise.
- How to use FX Breakout Radar?
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FX BREAKOUT RADAR (Lite)
$29.99
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FX BREAKOUT RADAR (Pro)
$59.99
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