Several in trading systems. Big Dog breakout, 4-7 GMT breakout, 4H box breakout, 4H custom stop loss breakout, literally hundreds of variations of the same idea. There is an interesting one that uses trendlines and the start of the new day EST that looks promising.
Several in trading systems. Big Dog breakout, 4-7 GMT breakout, 4H box breakout, 4H custom stop loss breakout, literally hundreds of variations of the same idea. There is an interesting one that uses trendlines and the start of the new day EST that looks promising.
I mean there are some good ideas from the turtles like normalizing risk but following their system 100% may not be relevant. Don't get me wrong there are a few things you can get out of it.
You can use a support and resistance indicator. Its based on price crossing above or below a moving average on the close and then returning the highest high or lowest low for a certain amount of periods, usually equal to the MA periods. Take the breakout of the resistance/support and use the opposing resistance/support as the stop loss.
Overall I tested it as a stop reverse system on 4 hrs and it works. I mean like any other other mechanized system it works well under certain conditions and not so well on others.
Personally I just use it to help me see important levels and trade based on those levels.
Mind you what I haven't done is try to test it with alternative trade management only the stop and reverse. It looks pretty good to me
I like to trade the SRDC breakout, basically its the break of yesterday's high or low. Its a very high probability setup, manage the risk at your own discretion.
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Joined Mar 2009
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Status: One pip at a time
|261 Posts
I think you would largely group breakout systems into
Support/Resistance breakouts
Session breakouts
or combinations of the two.
There is a myriad of approaches, like trading breakouts from the Asian session, weekly breakouts, H4 breakouts, higher/lower close of candle on any timeframe, assisted by other indicators or not etc.
Breakout systems tend to be very mechanical, and that can leave problems if price action behaves differently in, say, one Asian session than the last one. They need to be mechanized, however, becuase it is all about sticking to the rules in order not to dilute the statistical edge of the system. That, to me, is one of the essential lessons from the Turtle experiment.
For statistical normalization to work I think it is better to look at longer timeframes, at least D1 for session based breakouts. Problem with FX of course is that the daily candles start and end at different times depending on the broker location.
For support/resistance breaks, look at Donchian channels for a conventional approach or for the price to ride (in other words: not reverse at) the Bollinger Bands for something unconventional. Donchian draws you a rigid line, whereas the Bollinger Bands adjust for market volatility.
And to throw just one more in, the Cloud (Kumo) in Ichimoku Kinkyo-hyo charts is a dynamically adjusting support/resistance zone that takes into account momentum and volatility. Combined with the other elements of Ichimoku you actually get a base system, rather than just an indicator, without putting too much color on your charts. This can be traded as a breakout system on multiple timeframes if you enter when price goes through the cloud.
