The 34-EMA Breakout trading strategy with a trendline is a strategy that combines the exponential moving average (EMA) indicator with the price action. In the market with a good trend, this tactic can be applied quite effectively, you can backtest to verify it. The basic components of this strategy are as follows:
  • Timeframe: 5 minutes and more;
  • Currency pair: any;
  • Indicator: 34 EMA.
In this strategy, the 34 EMA is used to determine the current trend of the market and to assist you in drawing the trendline. You can initiate a trade after the break of the trendline when the price recovers, and once the price falls, the order will be entered.

Breakout strategy with 34 EMA and trendline - Buying condition


The conditions for entering buy orders when you trade with this strategy are as follows:
  • Draw a downward trendline and see if a breakout occurs;
  • If there is a breakout, the price must be above the 34 EMA;
  • After the breakout of the downtrend line occurs, watch for candlestick tops to form;
  • At this point, you must carefully watch this condition: the signal candlestick is a candle with a lower high than the top of the previous candle, if that high is broken, you can place a buy order at the market, or you can sell stop order a few times. pips above the top of that signal candlestick allow the order to enter if the price breaks that top;
  • Buy stop order is not executed and candlestick continues to form lower highs, you can move buy pending order to each new lower high until price rebounds again and activate the order;
  • Place the stop loss just below the bottom of the trigger candle.
Breakout strategy with 34 EMA and trendline - Selling condition


The selling conditions are similar to the buying conditions mentioned above, but in reverse:
  • Draw an upward trendline and see if a breakout occurs;
  • If there is a breakout, the price must be below the 34 EMA;
  • After the breakout of the upward trendline occurs, watch for candlesticks' bottoms to form;
  • At this point, you must carefully watch this condition: the signal candlestick is a candle with a higher low than the bottom of the previous candle, if that bottom is broken, you can place a sell order at the market, or you can buy stop order. pips below the bottom of that signal candle to allow order to enter if the price breaks down of that bottom;
  • Sell ​​stop order is not executed and the candle continues to form higher lows, you can move the sell pending order to each new higher low until the price falls and activate the order;
  • Place the stop loss just above the top of the trigger candle.
Breakout strategy with 34 EMA and trendline - Set profit target

Here are a few ways you can set take profit for a strategy:
  • Take profit at 3 times your initial risk;
  • If you trade on a daily chart, set a profit target of 80-250 pips;
  • If you trade the 4H chart, set your profit target at 40-120 pips;
  • You can use previous highs as the target profit for buy orders, and previous lows for sell orders.
Breakout strategy with 34 EMA and trendline - Risk management

You can protect your profits by moving the stop loss according to the following methods:
  • If trading daily charts, place the stop loss a few pips after each bottom of the daily candlestick if it's long, or after each high if it's short;
  • If trading chart 4H, brothers apply the same as daily chart;
  • One way to manage a good trade is to trail the trailing stop just right or on each correction point if the trend goes according to your prediction;
These price adjustment points essentially support and resistance levels, placing a trailing stop above or below these levels ensures you don't get out early and can master the trend for a long time if the trend is strong.

Breakout strategy with 34 EMA and trendline - Pros and cons

Advantages:
  • Allow Trader to trade according to trends;
  • Apply price action and trendline to enter orders;
  • When the price breaks the trendline, it is a fairly clear signal that the trend is changing and in addition, the 34 EMA shows you the market trend, so when you enter orders with this system, you absolutely have. the ability to enter orders at the beginning of a new trend.
Defect:
  • There will be times when you do not see enough price adjustment points (top and bottom) to draw a trend line, and times like this often happen when the market moves strongly behind those troughs and peaks;
  • Tends to give false signals in range or sideways markets.
Add a technique to the order:

You can use bullish reversal candles when setting up a buy trade and bearish reversal candles when setting up a sell trade. This can greatly improve your entry command.