The Zone Break Out

I am short after breaking Friday's low. I waited for the 1st 15 min candle to open after penetration.

In a complete method you always verify with a longer time frame. Here the 4 hour chart support the decision to go short. I caution it is Sunday night so I will set a Stop in profit as soon as possible.

Nice, simple and sensible. Are you targeting 1.4620 ish? The 50% and strong support?

Thanks bogus,

Good call. In my Money Management, I actually take two positions. I will take one out if we hit my first target area 1.4716 or close and let the second run to the area you suggested.

My first position is out. I actually caught a few extra pips but sticking to plan. I will let my second position run. I have 5 pips profit locked in on second position so there is no way to lose tonight.


If you look at this 4hr chart you could have actually traded from it alone. I do like to use the 15 min for entry but 4hr is much more useful to me when breaking support or resistance. In this case you can see my entry was timed as we broke the horizontal trend line I have on 4hr chart. Simple trade here really breaking 4hr support and Friday's low. Should take this trade every time.

This method is really very simply about breaking support and resistance. You can see we broke out of our consolidation early and then backed up. We just be patient and go short again when we break out new area of consolidation or the previous low. We are now down about to the area we expected to hit in the first place. I have now taken 3 trades. The first position was taken out with 20 + pips profit. The second ran the same and backed up to our profit of +5. Now we are in again and looking for a run down to the previous area of support on the 4hr.

As confirmation of the move short we use the 4hr chart as the real guide. We are now in an area where we will hit a lot of support. If we break this area it should run at least another 100 pips short, but it most likely will take a bounce back up first. We don't predict, we react.

Hi Powertrader,

Great strategy. Very simple and well explained. Thank you.

fxpilot

You are very welcome fxpilot. I am glad if this is helpful. I am a big fan of the basics. Really don't need a lot of indicators, just some trend lines, fibonacci and watch the price action.

One interesting thing about this method is you can trade the breakout more than once in a day. You want price to consolidate for a while but once it stalls out in an area you can trade the breakout either way. It does work best when the box is drawn between two fibonacci areas. It also works better when it matches with a break on the 4hr as it did earlier tonight.

Hi Powertrader,

A question on take profit targets. Since there is a major support level at 1.4625, why didn't you just let your trade run to that take profit level? I exited the trade earlier also just as you did. I am just trying to find out if there is a better way of managing such trades.

I sold the break of Friday's low at 1.4755 and exited at 1.4680, todays daily Pivot Support 2. I have found exiting trades difficult.

fxpilot

You are right. Exiting is the most difficult part. My general targets are fibonacci based, generally 38.2 or 61.8 levels on different time frames. But I have found entering with multiple positions allows you to bank profit as I did earlier while letting another position run. Sometimes it will come back and knock you out as it did earlier, but other times the last position will run and run. Hope this helps.

Just as we had suggested, we are now breaking some major support. Still have positions running from last entry. Notice the support levels on this 4hr chart. Set target to next fib level.

Here is the setup for tonight. I have fib'd the last dominate move down and now the zone is between the 0 and the 23.6 retrace. Obviously if we break low we will be breaking the low of yesterday and that would be a trade. This zone could change as we progress later into the evening, but as it stands now the trade long would be when we get a candle above the 23.6. I wish it were as simple as saying trade long outside high and short outside low but you should also be looking at the 4hr chart and price action as well. Practice will help you understand.

Here is the 4hr as I see it. I circled the area of concern for this evening. A movement out of support or resistance would be a trade. I don't think the breakout area is as obvious on this chart as it was last evening but if we break down, the low of yesterday is always a trade for me. Up is a little more tricky but more likely tonight. At least in the short run. Remember as always we react to what the market gives us, we don't try to guess where it is going.

Here I am adjusting the zone. Really we need some price action probably in the Euro session to show our direction. I will not go long until we break the daily pivot.

Today is one of those days when you don't have to trade. The market is messy and undecided. I am always a little skeptical of methods that never have losses. The zone breakout surely has losing day and today could have easily tricked you if you did not see the signs. Watch price action and candles on days like this. When you see candles with huge wicks and movement all over the place, it is probably a good day to play golf or something else.

Here is an example of what I mean. You can see we had some false breakouts and only late in the trading day do we see a true breakout. How would you catch this? You would have to ask someone smarter than me because looking at the chart after the fact you can make several conclusions but during the trading day, I think you could have been fooled. I am not sure of any method other than guessing that would be successful on a day like today.

I hope you like honesty because there are losing days in this method and in reality, in all methods. You must trade regularly to make the averages fall in your favor. In this breakout the averages will be greatly in your favor if you trade every day.

Here is the chart for tonight. We have a perfect setup for a breakout for tonight. There is no clear direction for tonight but we have bounced on the 38.2 fib from the last move down on 4hr chart. This chart is the 15 min.

Here is my 4hr chart and you can see the bounce off the 38.2. Notice we bounced between the 61.8 and the 38.2.