Comments on Day Breakout Strategy

 Comments on Day Breakout Strategy – Demo Account Practice Nov 2020

 By Queenie Wu                      7 Dec 2020

In this Demo account practice, I mainly used the daily breakout trading strategy.  This is a very simple strategy and we can place our trade everyday if the entry conditions are filled.

 Indicators used:

-          Breakout

-          Channel

-          Pivot levels

 Strategy steps:

 

1.      Timeframe: H1 XAUUSD

2.      A breakout box is formed using the hourly candles from 0:00 – 5:00.

3.      Observe the Channel vs. the candles position

4.      Observe the strength of the candles

5.      Use the breakout box to set buy stop or sell stop order

6.      Use pivot level to determine the TP

7.      Use the previous high or low to set SL level

8.      Manage the trades by trailing stop

 

Example on 17 Nov 2020:

After observing the position of the candles and the Channel, a sell stop order was placed at 1885.9, very close to the PP level of that day.  TP was set using the next supporting level, S1 of 1870.  Result: Trailing stop at 1881 with 482 pipettes earned.

 

Comments on my Day Breakout Strategy:

-          Advantages: The winning rate of this strategy is very high.  From the diagram below, we can see that it wins in most of the cases, except the ranging market situation. 

-          In this Demo account practice, 7 trades were placed using the Day BO strategy. All of these trades won.

-          Disadvantage: In the case of ranging market, fake BO may happen

-          Use of trailing stop:  Trailing stop can be used to protect the profit that I already have earned.  It is however that, once I set trailing stop, my position will be settled too early which results in less profit earned.  This happened many times.  Therefore, it is a dilemma on the decision of the use of the trailing stop.  This is one of the skills need to be sharpened.

-          Entry time: The breakout box itself is not enough to place a trade.  The use of the TMA channel together with the candles strength and the breakout box is crucial to increase the winning rate.

-          TP setting: The pivot levels are very useful to set TP as these levels are the key levels of the next support / resistance.

 

Day Breakout chart of H1 XAUUSD in Nov 2020

 

Example: Day Breakout chart of H1 XAUUSD on 17 Nov 2020