Trading principles

For a buy setup:
  1. Determine the daily price range of a currency pair that is inside the previous day's price range with at least 2 such inside candles (or for many days, better).
  2. Place a buy order 10 pips above the highest price of the day with the range within.
  3. Place stop loss and reversal orders 10 pips below the day's lowest price range.
  4. Take profit at 1: 2 RR or initiate a stop loss when price hits an RR 1: 2.
To counter the false break signal, if your buy order has a stop-loss, at which point the sell order will be filled, place your stop loss about 10 pips from the high of the day inside the range and use it carefully. Stop-loss technique to protect profits.

For sale setup
  1. Determine the daily price range of a currency pair that is inside the previous day's price range with at least 2 such inside candles (or for many days, better).
  2. Place a sell order 10 pips below the lowest price of the day with the range within.
  3. Place stop loss and reversal orders 10 pips above the high of the day your range is within.
  4. Take profit at 1: 2 RR or start moving your stop loss when the price hits an RR 1: 2.
To counter the false break signal, if your sell order has a stop-loss, at which point the buy order will be filled, place your stop loss about 10 pips from the lowest price of the day and use it carefully. Stop-loss technique to protect profits.

Trading example

Example of EURGBP framework D1 pair:


2 inside candles are clearly identified on the chart with the following candlesticks range within the range of the previous candle.

As a rule, we place a buy stop above the highest price and a sell stop below the lowest price 10 pips. Then the buy order is activated after 2 candles. And after 4, it should make a profit with a ratio of 1: 2. At this point, we can close the order or start moving the stop loss. Despite the trading style, you can choose the right way to exit the order.

Another example of the NZDUSD pair:


The difference between this and the previous one is that we have a stop loss and the reversal is triggered, indicating that the first breakout action is a false break.

As a rule, after defining the 2 inside candles, we put buy stop and sell stop in turn. Then the buy stop order is triggered by the next candle after the two inside candles, but then the price turns down and stops loss. At the same time, the sell stop order was matched and the price dropped sharply, quickly achieving a profit at the ratio of 1: 2.

One final example with D1 framework EURCAD chart:


This example will use additional technical indicators to help identify a trend. Looking at the diagram we can also quickly identify the two inside paths. The market creating a higher low indicates that a breakout is likely to go up.

In this chart, we see the MACD is also showing above the zero levels indicating the market is strongly up. With this further confirmation, we should opt for a breakout on the upside.

However, it does not matter if you trade according to the rules. That is placing buy stop and sell stop in turn with the stop loss of each order. As you can see, initially a sell stop is triggered, but then a stop loss and a buy stop are triggered and the order then takes profit at a 1: 2 ratio.

Conclude

With this strategy, the overall risk is quite high if done on a D1 chart, but the potential for a return after a breakout is also quite large.