The level breakout strategy is one of the most popular Forex technical strategies. It is based on the principle that if the price breaks through a certain level of support or resistance, then this can signal a continuation of the movement in that direction. Here are a few steps to help you use this strategy:
1. Determine the support or resistance level you want to use as the basis for your strategy. This level can be found on the chart using technical analysis tools such as trend lines, horizontal lines, fibonacci levels, etc.
2. Place an order to break the level. If the price reaches this level, you can place a buy or sell order to capture the move in the same direction. For example, if the price breaks through a resistance level, you can place a buy order in anticipation that the price will continue to rise.
3. Set a stop loss. This is very important because if the price does not move in the direction you expected, you could lose money. The stop loss should be set far enough away from the entry price to give enough room for the price to fluctuate, but not so far away that the risk of loss is too high.
4. Set a profit target. The profit target should be high enough for the trade to be profitable, but not so high that the probability of hitting it is too low.
5. Follow the market. If the price moves in the direction you expected, you can move your stop loss to protect your profit and close the trade when the profit target is reached.
It is important to remember that the level breakout strategy does not guarantee profit, and the Forex market can be unpredictable. Therefore, it is necessary to strictly adhere to the rules of risk management and not risk more than you can afford to lose.
What indicators to use for this strategy
iPump level indicator
Of course, first of all, it is desirable to have a level indicator, as it will help you standardize the definition of resistance and support levels and identify breakout levels with the same accuracy.
Power Reserve currency pair power reserve indicator
To determine the take profit potential and understand the size of the SL volatility. I recommend using the Power Reserve MT4 indicator
The importance of this indicator lies in the fact that it allows you to understand how much “fuel is left on the tool”. Imagine the situation, you drove off in a car with a half-discharged battery, on average, usually this amount of energy is enough for a car for 250 km, respectively, with all your desire, you cannot overcome a path of 700 km. So for each instrument, there is a certain daily price movement, and as a result of statistical observations, it was revealed that 95% of the time the asset passes 1 ATR per day, and only 5% of the time 2 or more ATR.
Example, daily ATR EURUSD = 682 pips. You enter a trade, let’s say, at a breakdown of the level with a TP of 500 pips, it would seem that you set the correct TP size, but you did not take into account that the asset had already passed 90% of its daily ATR by the time the trade was opened, and accordingly, the instrument most likely does not have enough energy to receive you TP, if you saw that the instrument had only 10% charge left, you would most likely either adjust the TP, or not enter the trade at all.