We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • What are the truths and myths of #forex trading? Find out from @DailyFX analysts here: https://t.co/uF75VPzstr #FOMOintrading https://t.co/xeromAGqqx
  • Macro data from around the world have long attested to the urgent need for a trade settlement between the US and China. Increasingly the corporate numbers are saying the same. Get your market update from @DavidCottleFX here:https://t.co/Qon7QUO80c https://t.co/rCOG78QQ2M
  • #Gold prices may fall while the US Dollar gains even as economic policies championed by the Trump administration invite inflation. Get your market update from @IlyaSpivak here: https://t.co/4lHhHsby56 $XAUUSD https://t.co/JmZxckVHdS
  • Cable (GBP/USD) remains just off its seven-month high print around 1.3165 as traders start to move to the side lines ahead of next Thursday’s General Election vote. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/CpCh13J9ZH #Brexit https://t.co/PIh6WUqbsK
  • (Weekly Technical Outlook) GBP/USD, EUR/GBP, GBP/JPY, GBP/CAD Outlook as UK Election Looms $GBPUSD $EURGBP $GBPJPY #UKelection2019 - https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/12/07/GBPUSD-EURGBP-GBPJPY-GBPCAD-Outlook-as-UK-Election-Looms.html?CHID=9&QPID=917702 https://t.co/iuILHYczJ7
  • Why do you require consistency in trading and why does it matter? Find out: https://t.co/WlEFlluGfZ #tradingstyle https://t.co/TkMtJQKatx
  • By issuing debt denominated in $USD, China is making a long-term bet that it will be cheaper to pay back its loans over time in the US Dollar; it believes the value of the US Dollar will fall. Get your market update from @CVecchioFX here:https://t.co/5GO9UrvO4y https://t.co/xV9urXXf48
  • What are some risk trading management techniques? Find out: https://t.co/RShdlDz9RA #tradingstyle https://t.co/M3ASPIHAep
  • #Dow Jones stages impressive recovery on a firm NFP report. #FTSE 100 eyes UK general election. Get your equities technical analysis from @JMcQueenFX here: https://t.co/o28UcG6N3l https://t.co/SwGAaFCFND
  • Why do you require consistency in trading and why does it matter? Find out: https://t.co/f4y1FOOZnM #tradingstyle https://t.co/x5HgYopWc5
A Basic Indicator Breakout Strategy

A Basic Indicator Breakout Strategy

2013-04-02 19:00:00
Walker England, Forex Trading Instructor
Share:

Article Summary:The GBPAUD has decreased as much as 1295 pips for 2013. As the trend continues, traders can use Donchian Channels to trade breakouts toward lower lows.

As strong Forex market trends develop this year, breakout strategies continue to be an effective approach to trading the market. Previously we discussed a simple breakout strategy using price action to identify key levels of support and resistance. However, many traders that are not comfortable with price action, so one alternative may be to trade breakouts using a technical indicator. Today we are going to review trading a breakout using Donchian Channels.

Learn Forex – GBPAUD Price Channels

A Basic Indicator Breakout Strategy

Trading Donchian Channels

When Donchian Channels are placed on a chart, they are specifically designed to identify the high and low for a specific currency pair over a selected period. Above we can see the indicator at work on the GBPAUD using a 20 period setting. These channel lines designate the current 20 periods high and low values, which also symbolize current levels of support and resistance. Breakout traders in a downtrend will look for price to break below the lower channel prior to creating new entries in the direction of the trend. The same is true in an uptrend, where traders will identify the upper channel as a potential area to enter the market.

Since the price of the GBPAUD has declined as much as 1295 pips for the 2013 trading year, traders will want to identify new entries to sell the pair on a breakout of the lower channel. With our current low identified by the Donchian Channels at 1.4380, traders can begin preparing for a breakout below this value. As pictured below, an entry order can be placed at a minimum of one pip below this point, so orders are entered on a breakout to lower lows.

Learn Forex – GBPAUD Daily Breakout

A Basic Indicator Breakout Strategy

Setting Risk

Once an order is placed, traders need to consider managing risk. One of the easiest methods, of managing risk is to utilize the top pricing channel as depicted above. The top pricing channel (representing the 20 period high), acts as an area of resistance In a downtrend and price is expected to continue to make lower lows and stay below this value. In the event that a new high is created and a new 20 period high is made, traders will want to exit their positions. This is a great strategy for traders that want to manually tail and move their stop order with the decreasing channel as the trade moves in their favor.

Next: Trading False Breakouts (36 of 50)

Previous: Can False Breakouts be Prevented?

To contact Walker, email wengland@DailyFX.com. Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, CLICK HERE and enter in your email information

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.