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
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
GBP/USD
Bearish
USD/JPY
Bullish
Gold
Bullish
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
Bullish
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
Bitcoin
Mixed
More View more
Real Time News
  • Central bank independence has several advantages and disadvantages. Find out what they are in-depth with @MartinSEssex here: https://t.co/wVFXbbTxf1 https://t.co/jtZTvodpCt
  • The price of oil preserves the advance following the OPEC meeting as the US and China, the two largest consumers of crude, reach a trade deal. Get your crude #oil market update from @DavidJSong here: https://t.co/g5lxDaRvWL #oott https://t.co/yeelVJU5OK
  • Have you been catching on your @DailyFX #podcast "Global Markets Decoded"? Catch up on them now, before new episodes release! https://t.co/mk1w1DM2Rh https://t.co/rEVhCnC0vY
  • Asia’s vast and growing importance to the world economy is not yet matched by the presence of a currency trading center to rival the established order. Get your update on market drivers in Asia here: https://t.co/r3Ku0p9dw1 https://t.co/I1AA0UEyWq
  • Geopolitical developments send #oil prices soaring or falling. Get your market update from @MartinSEssex here:https://t.co/XVXLyG8vjq #OOTT https://t.co/o4zt4pmSzc
  • The $USDINR may fall as the Nifty 50 rises after the US and China avoided tariff escalation and Indian CPI increased at its fastest pace since July 2016 amid on onion shortage. Get your market update from @ddubrovskyFX here:https://t.co/iXLf98geXL https://t.co/uVwbkkkl09
  • My weekend trading video: 'A #Dow and Yuan Retreat Could Break 2019's Bullish Complacency' https://www.dailyfx.com/forex/video/daily_news_report/2019/12/14/A-Dow-and-Yuan-Retreat-Could-Break-Break-2019s-Bullish-Complacency.html?CHID=9&QPID=917719
  • The $USD may extend declines against its ASEAN counterparts after the Fed rate decision. The Philippine Peso and Singapore Dollar are attempting key technical breakouts. Get your market update from @ddubrovskyFX here:https://t.co/JoPLb4Oi2q https://t.co/fKzeBlWaCx
  • Negative yielding government bonds – What are they telling us? Find out from @nickcawley1 here: https://t.co/F6JuhmrvPT https://t.co/Mf9e1cgWmR
  • The #Euro jumped higher to challenge range resistance capping upside progress since mid-October. Signs of ebbing momentum warn it may be back on defense soon. Get your market update from @IlyaSpivak here: https://t.co/MGqVDEWhUD https://t.co/rQRxJAmLWi
Finding Breakout Trades in Current Market Conditions

Finding Breakout Trades in Current Market Conditions

2014-09-27 03:00:00
Rob Pasche, Forex Trading Instructor
Share:

Talking Points:

  • Increased Volatility is good for breakout trading
  • Donchian Channels can find breakout trade entries
  • Sentiment can strengthen our Donchian Channel signals

We’ve seen an uptick in volatility the past couple of weeks across the board. This has led to some exciting opportunities for breakout traders as they take advantage of larger than normal price moves. One mistake that traders often make is ignoring the conditions of the market they are trading. They might be trading an excellent strategy, but if market conditions do not match up with the strategy’s style, traders might not like the results that they see.

Finding Breakout Trades in Current Market Conditions

(Copied from Weekly Strategy Outlook 9/22/2014)

David Rodriguez’s Weekly Outlook explains how much volatility has risen lately and how most pairs are ripe for breakout trading. So today we will look at a breakout strategy that has been a staple in my own account for years, Donchian with a Sentiment filter.

Download & Setup Donchian Channels

Donchian channels are not available on FXCM’s Trading Station Desktop by default. We must download and install this tool from FXCMApps.com. Follow the instructions below to get this tool available on your own charts at home.

  • Go to the Donchian Channel download page, select purchase (it’s free).
  • Input your information and download the file.
  • Unzip the file and double click on the .exe file that’s inside.
  • Complete the installation steps and close/re-open Trading Station Desktop.

Now that we’ve installed the indicator on our platform, we need to add it to our charts with the proper settings. Click the “Add Indicator” button above the charts (or click the “I” key on your keyboard). Select the Donchian Channel from the indicator list and click OK. We next want to adjust the settings to match the image below. Click OK.

Learn Forex: Preferred Donchian Channel Settings

Finding Breakout Trades in Current Market Conditions

(Created using Marketscope 2.0 charting package)

We should now see the Donchian Channels on our chart. It should appear as a price channel that adjusts to the high and low of the last 24 candles. Now we are ready to look for trade setups.

Finding Breakout Trades Using Donchian Channels

My preferred time frame for this strategy is a 1-hour chart. Once we are setup, it is very easy to identify breakouts. We simply need to wait until the current candle closes outside the Donchian Channel and then place a trade in the same direction. So when we have a candle that moves and closes above the upper line, we would initiate a buy trade. When a candle moves and closes below the lower line, we initiate a sell trade. The chart below shows a textbook example of a breakout sell trade.

Learn Forex: Breakout Sell Trade Setup

Finding Breakout Trades in Current Market Conditions

Using SSI as Confirmation Filter

To further refine our breakout entries, I’ve found it’s a good idea to use SSI as a direction filter. For a full write-up on how retail sentiment is read and used, read My Favorite Trading Tool, How to Use the SSI. In essence we only want to take breakout trades that would put us in a position that is opposite of the retail majority. So we want to only take buy trades when SSI is negative and only take sell trades when SSI is positive.

Learn Forex: EURUSD SSI

Finding Breakout Trades in Current Market Conditions

(Created using DailyFX Plus’ SSI)

For the breakout example above on the EURUSD, Donchian gave us a sell entry. That means we want SSI to be positive in order to confirm the trade. It turns out that the SSI for the EURUSD is positive giving us a green light on this break out trade. Not every trade will be successful, but it turns out this breakout trade had stellar results, as seen below.

Learn Forex: Successful Donchian & Sentiment Trade

Finding Breakout Trades in Current Market Conditions

In Conclusion

The increase in volatility is sight for sore eyes for most Forex traders, but this also means we need to adapt our trading technique to match these changes. The breakout strategy explained above is, in my opinion, a great way to attack this kind of market. If you would like to test these methods risk-free, download a Free Forex Demo account today with free charts and real-time pricing data.

Good trading!

---Written by Rob Pasche

Start your Forex trading on the right foot with the Forex Fast-Track Webinar Series. This 4-part, live webinar course is the disciplined Traders’ Fast-Track to the Forex Market. Topics include:

  • Using FXCM’s award-winning trading platform
  • Calculating Leverage and reducing risk
  • Trading with a simple (yet effective) trading strategy
  • Maintaining for Forex account and enrolling in on-going education

This course is completely free, so sign up or watch on-demand today.

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

DISCLOSURES

News & Analysis at your fingertips.