GBP-USD Breakout Strategy + Volatility - Need Help!

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Hi all,

Relatively new to Forex Trading, and I've programmed my own Breakout EA for trading GBP-USD based on the Asian session. The basic strategy is the usual boring method of:

  • Take a pre-defined time period of ~ 22:00 to 08:00 (GMT), which can also be changed via input;
  • Find the High and Low of the period;
  • Calculate the Price Range of the period;
  • At 1 minute past the end of the time period, place the pending orders;
  • A long pending order with:
    • Entry Point = Period High + BreakoutBuffer;
    Take Profit = Period High + Price Range;
    Stop Loss = Period Low - Breakout Buffer;
  • A short pending order with:
    • Entry Point = Period Low - BreakoutBuffer;
    Take Profit = Period Low - Price Range;
    Stop Loss = Period High + Breakout Buffer;
  • Where the Breakout Buffer can be set in the properties to a few pips.

Very basic strategy, and I've back tested this with varying times and I do get some nice profits, but I also get a lot of stop losses. I've visually looked through a lot of graphs of when this trades, and I maybe mistaken, but I think I can prevent a lot of "false breakouts" by automatically varying the BreakOut Buffer that I use, the Stop Loss I use and the Take Profit used depending on the volume of trading and the "erraticness" of the predefined period.

e.g. If within the given range, trading is very calm and volume of trades is low, then it looks as though either breakout the following morning will hit the ranges profit target.

However, if there is erratic behaviour, high volumes, and large swings within the period, then this is when I get the false Breakouts, and the stop losses are hit. I was thinking that if I can detect this, then I can increase the Breakout buffer by a relative percentage, and reduce the Take Profit as well.

I'm not sure if this sounds totally stupid from some of the seasoned traders out there, but if it does make sense - is there anyone who can help me in recommneding some Indicators to help identify the volatility / volumes that is traded during this time? I'm not sure of the correct Forex terminology to describe what I need. Any help would be much appreciated!

Cheers..

 

Use the volumes indicator. Its a standrd indicator in MT4.

 

Thanks for the suggestion.

f1trader - will start out basic and try to use the Volume indicator. I'm not at my trading terminal at the moment (im stuck in work instead!) so can't see how the indicator works, but off the top of my head, if I use the Volume indicator, I'm assuming it gives me simply the Volume of trades made (both buy and sell) at any given tick / bar. So when it comes to performing a comparison, what base case do I compare it to? This is what I am struggling to get my head around in terms of some basic chart / forex knowledge.

i.e. How do I know that a volume of 100 indicates a "quiet" trading range or an "erratic" range...

As for the Waddah Attar Explosion Indicator - did a quick forum search and that indicator looks really cool and interesting. Will have to read up about this one a lot more, as the actual screenshot does look like something that I might need to use.

Cheers for the feedback - will read up on it some more....

 
daCoops:
Hi all,

Relatively new to Forex Trading, and I've programmed my own Breakout EA for trading GBP-USD based on the Asian session. The basic strategy is the usual boring method of:

  • Take a pre-defined time period of ~ 22:00 to 08:00 (GMT), which can also be changed via input;
  • Find the High and Low of the period;
  • Calculate the Price Range of the period;
  • At 1 minute past the end of the time period, place the pending orders;
  • A long pending order with:
    • Entry Point = Period High + BreakoutBuffer;
    Take Profit = Period High + Price Range;
    Stop Loss = Period Low - Breakout Buffer;
  • A short pending order with:
    • Entry Point = Period Low - BreakoutBuffer;
    Take Profit = Period Low - Price Range;
    Stop Loss = Period High + Breakout Buffer;
  • Where the Breakout Buffer can be set in the properties to a few pips.

Very basic strategy, and I've back tested this with varying times and I do get some nice profits, but I also get a lot of stop losses. I've visually looked through a lot of graphs of when this trades, and I maybe mistaken, but I think I can prevent a lot of "false breakouts" by automatically varying the BreakOut Buffer that I use, the Stop Loss I use and the Take Profit used depending on the volume of trading and the "erraticness" of the predefined period.

e.g. If within the given range, trading is very calm and volume of trades is low, then it looks as though either breakout the following morning will hit the ranges profit target.

However, if there is erratic behaviour, high volumes, and large swings within the period, then this is when I get the false Breakouts, and the stop losses are hit. I was thinking that if I can detect this, then I can increase the Breakout buffer by a relative percentage, and reduce the Take Profit as well.

I'm not sure if this sounds totally stupid from some of the seasoned traders out there, but if it does make sense - is there anyone who can help me in recommneding some Indicators to help identify the volatility / volumes that is traded during this time? I'm not sure of the correct Forex terminology to describe what I need. Any help would be much appreciated!

Cheers..

Dear Sirs,

Thank you for sharing your strategy.

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