The ATR Amplifier Breakout strategy is a unique approach that harnesses the Average True Range (ATR) indicator to unlock breakout opportunities.
By leveraging verified support and resistance levels and amplifying momentum analysis by utilizing the ATR, this strategy aims to help traders maximize the success of their entry signals.
1. Identifying Verified Support and Resistance Levels
Successful implementation of the ATR Amplifier Breakout strategy begins with the identification of verified support and resistance levels. This can also be a sloping trendline. The key is that the support or resistance has been tested and held at least three times, forming a solid foundation of where the market is likely to react on the charts.
As traders, we exercise patience and discipline to spot these significant levels, as they hold the potential to trigger profitable breakout trades.
2. The Breakout Signal and ATR Amplification
Once a verified support or resistance level is established, we patiently wait for the price to break above the resistance level (for long trades) or below the support level (for short trades). This breakout signal indicates a potential shift in market sentiment, opening the door to profit opportunities.
But we don’t stop there. We then confirm the potential of each breakout by using the ATR indicator.
The ATR serves as our amplifier, ensuring that the breakout candle exhibits substantial momentum before we enter the trade. For an ATR Amplifier Breakout trade, we need the breakout candle to have a range that is at least 30%-40% larger than the current ATR value. This condition ensures that we capture significant price movements, enhancing our profit potential.
So, for example, if the ATR value at a given moment is 10 (i.e., 10 pips), then the breakout candle needs to be at least 13-14 pips.
3. Confirmation and Trade Execution
Confirmation of the breakout occurs when the breakout candle closes above the resistance level (for long trades) or below the support level (for short trades).
The closure of the candle acts as a signal, empowering us to execute the trade with confidence. We’ve witnessed firsthand how this confirmation step adds an extra layer of precision to our trading decisions, bolstering the success rate.
We adopt a structured approach to setting profit targets in the ATR Amplifier Breakout strategy to maximize our gains.
We base our targets on the height of the breakout candle, aligning them with different multiples of the breakout candle’s size. Our first target is set at the size of the breakout candle, while the second target is placed at 1.5 times the breakout candle’s size. For those seeking additional profit potential, a third target can be placed at 2 times the breakout candle’s size. These targets offer flexibility, enabling us to adapt to various market conditions and adjust our position accordingly.
Stop Loss orders
We place our stop loss just behind the breakout candle to protect our hard-earned gains.
For short trades, the stop loss is positioned above the breakout candle, while for long trades, it is placed below the breakout candle. This tight stop loss placement serves as a safeguard against immediate adverse price movements, allowing us to manage risk effectively.
A Personal Journey of Success
Embrace the ATR Amplifier Breakout strategy as your pathway to success. As you integrate it into your trading arsenal, you’ll witness increased profitability and the development of discipline and patience within your approach.
Remember, trading strategies are not one-size-fits-all. Continuously evaluate and adapt the ATR Amplifier Breakout strategy to align with your risk appetite and trading style. This is your journey, and the ATR Amplifier Breakout strategy is your guiding light. Embrace it, personalize it, and embark on a trading adventure that is uniquely yours.
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