EBC Forex Breakout Trading Strategy: Four Core Steps

This article introduces a simple and effective trading strategy, the Breakout Trading Method. We trade price breakouts and manage risk in four simple steps. You should have heard the phrase "sell high and sell low", which applies to many different industries, from real estate to automobiles. But sometimes, all you need to do is "buy high and sell low". Breakout trading is just that, especially in volatile market conditions or when there is a strong trend. In ebcForex PlatformWhen using it, we can refer to the following four steps to trade price breakouts.

1. AddDonchian Channel Indicator(DNC) to your trading chart

2、Determine the trend direction

3. Enter the trade when breaking through the Donchian channel

4. Set the stop loss level on the other side of the channel

Let's describe in detail how each step of the strategy is applied.

Donchian Channel Indicator

addDonchian Channel IndicatorGo to your intraday chart (1-hour chart or 4-hour chart) and enter parameter 55. As shown below

Donchian Channel Indicator

The Donchian channel is suitable for traders with different trading cycles. When used on the daily chart, the indicator emits fewer trading signals, but it is relatively reliable and the trading duration is relatively long. When used on the timeshare chart, the indicator emits more trading signals, but there is also a higher chance of errors.

Determine the trend direction

No matter what trading strategy, we recommend that traders trade with the trend. Because homeopathic trading brings many benefits, two of the main benefits are: one is to avoid traders from trading rashly, and the other is to reap more profits when the trend judgment is correct. UseDonchian Channel IndicatorTrading and trend trading are not in conflict. We will discuss how to combine the two to develop a trading plan.

Execute entry orders

Once you have confirmed the trend direction, the entry price can be determined by combining the trend and the Donchian channel.

according toDonchian Channel Indicatortransaction

For example, in an uptrend, we want to buy when the price breaks through the top of the Donchian channel (e.g. one basis point above the top of the Donchian channel). The best trading signal occurs when the price first touches the upper area of the Donchian channel, and subsequent breakout points can also be considered, but as the trend develops, the probability of a price reversal will increase, so it is not as favorable as the best entry point.

Similarly, in a downtrend, we want to sell at the bottom of the Donchian channel before the price falls (e.g. a few points below the lower end of the Donchian channel), and likewise, the best trading signals appear in the area where the lower track of the channel is first touched.

How to play

Once you have decided at which price to enter the market, it is equally important to know where to enter. Under this strategy, we use the other end of the Donchian channel as our stop price. Adjust the stop price in real time according to the changes in the channel.

How to baseDonchian Channel Indicatorappearance

As you can see from the chart, the trend is up, and we use the lower track of the Donchian channel as a stop loss position. As long as you hold the position long enough, the lower track of the channel and the direction your stop loss moves will delight you over time. The longer the trade lasts, the more profit the moving stop will guarantee.

Summary: Many traders often ask if they can trade price breakouts without the Donchian channel. The answer is yes. The fundamentals of the breakout trading strategy are the same, namely finding key support/resistance levels and waiting for the price to break through. Whichever approach you choose, you can practice these methods in EBC Forex trading.

However, as with other trading strategies, opening and closing positions are only part of a complete trading plan. When trading, traders should confirm in advance the losses that the capital account can bear. It is recommended that the maximum potential loss of all positions does not exceed 5% of the total capital, and you can also adjust the percentage of your capital size according to your own needs.