Category: Forex Trading Strategies

20 day High and Low Breakout

20 day High and Low Breakout

Trading entries based on new price highs and lows of N days/periods ago are as old as trend following and breakout trading itself.
However, it is not too much to say that Turtle trading and the Donchian price channel breakout methodology pushed it into the mainstream.
The trading rules are simple and straight forward. As with any trend following strategies, it performs best in a market that has large price moves and sustained trends.

Currency pairs: EUR/USD, EUR/JPY, GBP/USD, GBP/JPY and USD/JPY.
Indicators: 20 and 10 Donchian channels, 14 ATR

Japanese Yen currency pairs perform best and often have sustained trends probably due to the popularity of Carry trading strategies.

For Longs/Buys:
Set Long/Buy order 2 pips above the High of the previous 20 days.
Initial stop loss will be equal to ATR.
The 10 Day low will be our trailing stop when price move further up. Stop is placed 2 pips below it.

For Shorts/Sells:
Set short/sell order 2 pips below the Low of the previous 20 days.
Similarly, initial stop loss will be 1 ATR away.
The 10 Day high will act as our trailing stop when price moves further down. Stop is placed 2 pips above it.

Example:
S1
20 day low is 1.5125, sell order at 1.5123
ATR is 145, so initial stop loss is 1.5268
E1
10 day high is 1.4611
Exit trade at 1.4613
Profit is 510 pips on 145 pips risk. (3.5 times)
L2
20 day high is 1.4770, buy order at 1.4772
ATR is 197, so initial stop loss is 1.4575
E2
10 day low is 1.5561
Exit trade at 1.5559
Profit is 787 pips on 197 pips risk. (4 times)20-10 donchian 20-10 donchian-closeup

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