20# Two-bar Breakout System Trading System

Submit by Joy22

 

The 2 bar breakout system is designed to capture short term trends by going long or short depending on the pattern formed by the 2 most recent price bars.  The essence of this method is to look for reversal of the immediate directional momentum.

 

The rules of this method are:

 

Long trades

 

Enter:

  1. Today’s low is less than the previous day low

  2. Today’s high is less than the previous day high

  3. Today’s close is less than the open

  4. Go long at the next trading bar if the price goes above today’s high + 1 tick

Exit:

  1. Use a trailing stop at previous day’s low

  

Short trades

 

Enter:

  1. Today’s low is greater than the previous day low

  2. Today’s high is greater than the previous day high

  3. Today’s close is greater than the open

  4. Go short at the next trading bar if the price goes below today’s low - 1 tick


Exit:

  1. Use a trailing stop at previous day’s high

 

To see this method in action, let’s try it out on EURUSD currency pair.

 

In the picture below Two-bar Breakout System Trading System in action.

Two Bar Breakout
Two Bar Breakout

The method generated 27 long signals with 18 profitable trades giving a total return of 1937 pips.

 

Share your opinion, can help everyone to understand the forex strategy.

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Comments: 1
  • #1

    keith (Friday, 28 March 2014 03:23)

    how do you play the gaps ?