Forex Breakout Box Indicator
This is a Forex Breakout Box indicator for trading forex on intraday basis. It uses the increase in volatility at the beginning of the European session. The indicator contains alerts. Try now!
Description
As you know, trading in the forex markets occurs with varying activity within a day.
For example, during the so-called Asian session, forex traders are less active. But when the business day begins in Europe, trading volumes increase and bullish and bearish bars widen. This is due to the fact that the big banks and stock exchanges start the official working day, and professional traders influence the price dynamics with the high volumes of their orders.
The Forex Breakout Box Indicator for MT4 takes advantage of this intraday change in volatility.
When you add the indicator to your price chart, you will see three rectangles for each day.
Rectangle A is red.
Rectangle B1 is orange.
Rectangle B2 is blue.
The numbers indicate the levels where the upper and lower lines of rectangle B2 are plotted.
How the Forex Breakout Box indicator works
The left line of rectangle A coincides with the beginning of the day. The right line of rectangle A coincides with the beginning of the European forex trading session (the exact time value can be set in the indicator settings). The upper and lower lines of rectangle A are drawn through the high and low, which were formed before the beginning of the European trading session.
The left line of rectangle B1 coincides with the start of active forex trading in Europe. The right line of rectangle B1 is set in the indicator settings. The upper and lower lines of rectangle B coincide with the high and low, that were formed before the start of the European forex trading session.
The left and right lines of rectangle B2 coincide with rectangle B1. The upper line of rectangle B2 is built above the upper line of rectangle B1 at a distance specified in the settings. Similarly, the bottom line of rectangle B2 is built below the bottom line of rectangle B1.
How to use the Forex Breakout Box indicator for trading
All rectangles are plotted automatically.
The indicator redraws the top and bottom line of the rectangles as forex trading goes on before the start of the working day in Europe.
When the European trading session opens, the rectangles stop redrawing.
Your objective is to open a position on a rectangle breakout.
How do I verify a forex breakout?
The Forex Breakout Box Indicator will help with this.
As soon as the price bar closes above rectangle B1 or B2 – you have a bullish breakout signal.
As soon as the price bar closes below rectangle B1 or B2 – you have a bearish breakdown signal.
Which rectangle to choose for forex breakout verification?
Technically, there is no key difference which rectangle to use for signals – B1 or B2. Using a B2 rectangle, you will focus on stronger impulses, respectively, the signals will come less frequently.
Buy Signal
The signal to buy comes when the price bar closes above the upper line of the blue rectangle B2. This means a breakout of the resistance line, which was formed before the start of the European session.
The protective stop-loss order is recommended to be set just below the previous local low. And the take-profit can be set higher at the distance of the double height of rectangle B1.
By setting a stop-loss inside rectangle B2 with a target at double height, you will always have a risk:reward ratio at an acceptable proportion, such as 1:2 or 1:3.
Sell Signal
The chart below shows an example of a sell signal in the EURUSD market.
A short position should be opened when the price bar closes below the bottom line of rectangle B2. This means you trade a breakout of the support line, which was formed before the start of the European session.
The position can be managed according to the mentioned plan:
- Stop-loss – above the previous high within the rectangle;
- Take-profit – below the bottom line at a distance = 1.0132-(1.0185-1.0132) = 1.0079
You can also apply other methods of position management – for example, trailing-stop (in order to stay in the trend as long as possible).
Which indicator is best for breakout
The Forex Breakout Box indicator may be the best option because of its advantages:
- allows to implement a classic breakout trading strategy;
- ease of use;
- can be used to open bullish and bearish positions;
- ability to test on the history;
- replaying of the indicator in the MT4 built-in strategy tester;
- alerts;
- allows to implement a classic breakout trading strategy;
- based on volatility change intraday;
- can be used as an independent tool, as well as in combination with a volume indicator, and other indicators and techniques.
At the same time, the indicator has its disadvantages:
- Less suitable for trading forex pairs that do not belong to the eurozone (e.g. AUDUSD).
- Only suitable for intraday trading. Not applicable to the daily and weekly charts.
- Does not guarantee a profit (however, like any other forex indicator).
Evaluate the pros and cons of the indicator and how it fits your trading style.
Conclusion
The Forex Breakout Box Indicator for Metatrader helps to trade on forex intraday, using the impulses that arise after the beginning of the active European trading session. By changing the parameters of the indicator, you can configure it to trade at the opening of the European session.
Before you start using the Forex Breakout Box indicator, practice on a demo account. Keep in mind the holiday calendar and the release date of important news. Make sure you have experience interpreting Forex Breakout Box signals, and only then risk real money.
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