I’ve read many website or forum that discuss about 2 bar breakout strategy. It’s a highly profitable system. We can use any time frame but it is recommended to use H4 or higher since there are many noise or false breakout on lower time frame. Its very simple and mechanical which means no indicator needed. When combined with candlestick pattern, this 2 bar breakout strategy will be more powerful. Here is the example of 2 bar breakout strategy on H4.
On the chart above, we have 7 trades and we have 5 wins with 2 loses. We have +188 pips and -51 so we still have +137 pips. This calculation is based on 1:1 ratio. This value will be bigger when we can do trailing stop.
- Current candle’s low is greater than previous candle’s low
- Current candle’s high is greater than previous candle’s high
- Current candle is a bullish candle — but also works on bearish candle
- Open SELL when the next candle goes below current candle. If not, there is no trade
- Current candle’s high is lower than previous candle’s high
- Current candle’s low is lower than previous candle’s low
- Open BUY when next candle goes above current candle. If no breakout, there is no trade and wait for another signal.
At least use 1:1 target ratio. Do not close the trade on the middle. So we only have two possibilities, hit stop loss or hit take profit. The stop loss should be placed few pips below the current candle’s low (for Long position).