Breakout Trading System


The "breakout box" system is a simple and an effective method of trading. Do not be fooled by the sheer simplicity of this method. Just because it is simple does not mean it is not profitable. You do not need complex trading systems to be a successful Forex trader. The one rule of thumb people always forget is "keep it simple". Many people search for a complex multi step trading system with 3, 4 or more indicators. This is not the case. Keep it simple.

 

Setup

 

At 08:00 EST (New York Time), draw a box enclosing the high and low of the previous hour.

 

Entry

 

BUY if the price moves above the box by 20% of the box height.
SELL if the price moves below the box by 20% of the box height.
 
This signal is only valid for one hour after it is generated.
 
Exit
 
Close the BUY trade when the price hits 400% above the box height.
Close the SELL trade when the price hits 400% below the box height.
 
Initial stop loss for the BUY trade is the bottom of the box.
Initial stop loss for the SELL trade is the top of the box.
 
Place a trailing stop equivalent to the size of the box to capture the profits gained.

 

 

Currency Pairs


This method works best with volatile pairs such as GBPJPY, or GBPUSD.

 

There are many variations of the box break out method. The rules for this method are not set in stone. You can modify the setup to your individual profit, and risk appetites, and still find the method is profitable.

 

Box Size


Instead of a 1 hour box, you can use a 4 hour box, an 8 hour box, or even a daily box. However, we would not recommend boxes for time periods under an hour. We find the profit targets are less likely to be hit in smaller time intervals.

 

Buffer Area

 

Many people choose a set pip size for the buffer area above/below the box instead of 20%. We have seen 10 pips, to 20 pips in other variations of the box break out method.