The Breakout Strategy is an often used strategy in Forex. The basic idea of this strategy is one of the best-known economic concepts: “supply and demand”. Basically, a price can vary between two levels. The higher and the lower level. When the value is close to the highest level, it will tend to go down, and when it reaches the lowest level, it will tend to rise. That rule is the base of the Breakout Strategy. Sometimes that breakout is only temporary, but it is enough to make money from it.
How to use Breakout Strategy in Binary Options
– There are two ways to use Breakout Strategy in binary options:
> Short duration options – For time-frames of 5, 15 or 30 minutes. The market has to be in a neutral trend. We should use the same indicator that is used for 60 seconds. The indicator works on an MT4 platform and will be made available in the training classes that I give.
> Long-Duration Options – For time intervals of 4 hours or 1 Day. The market does not need to have a defined trend, the indicators simply need to show the asset oversold/overbought promising a breakage or retracement.
– The basic idea is to find points that form resistances, causing a momentary breakout. This breakage can be just for the price to come back to gain strength and follow the same course, or it can be a complete reversal of the trend. I often use this strategy in Forex, especially for 4 hours and 1 Day. For those who trade with 60 seconds, in News Trading or Following the Trend , you can also use the Breakout Strategy in trades for the end of the day. Its use is interesting as it combines perfectly with other strategies that are typically for shorter periods of time.
Take a look in the example below.
– In this asset (EURUSD), 7 operations were carried out, of which 5 made a profit (the green bars) and 2 lost (the red bars).
– Each operation lasts 24 hours.
– The robot gives the input signal at the end of the candle and we only have to put the Binary Option choosing the duration of 1 day (expiration time).
– Since in this example we work with long periods of time, we must use several pairs, or we must combine this strategy with others. Each month, each asset allows an average of 4 or 5 operations.
Breakout Strategy Conclusion
This strategy is interesting because the percentage of trades with profit is high. If we use long expiration times, such as 1 day (as in the example above) the percentage of possible profits goes up because the longer the expiration time of the binary option, the easier it is to predict the movement of the price of the asset.
Traders who use this strategy normally either use a greater risk, 5% of the value of the account in each trade and multiple assets at once, or use other strategies to diversify and be able to place more trades per month, thus boosting profits.
Although the operation of the two markets (binary options and Forex) is different, my opinion is that the implementation of this strategy in binary options works well, especially for 4-hour or 1 day trades.