The PipStorm Breakout Strategy combines the power of identifying breakouts during the Asian session with the momentum of the GBPUSD currency pair. This smart strategy allows traders to ride the waves of opportunity and capture significant gains. In this article, we will explore the key elements of the PipStorm Breakout Strategy, providing a concise and organized trading system to help traders navigate the exciting world of forex trading.
Daily Chart Trend Identification
By utilizing the MACD histogram (colored yellow on the chart), we can identify the prevailing trend and assess its strength. A positive MACD histogram above the zero line indicates a bullish trend, while a negative histogram below the zero line signifies a bearish trend. Traders should also take note of the histogram’s movement, with a rising histogram indicating strong momentum in the respective trend direction.
- If the MACD histogram is positive (above 0), it indicates a bullish trend.
- Additionally, if the histogram is rising, it signifies strong trend momentum.
- Both MACD conditions are required to set the stage for trading a PipStorm breakout trade.
- If the MACD histogram is negative (below 0), it indicates a bearish trend.
- If the histogram is falling, it means the bearish trend momentum is strong.
- Both MACD conditions need to be met before we can trade the PipStorm breakout strategy.
Switch to a lower timeframe and mark the Asian range:
Transitioning to the 1-hour timeframe during the European morning sets the stage for executing the PipStorm Breakout Strategy. This timeframe adjustment aligns with the conclusion of the Asian session, which is crucial for identifying breakout opportunities.
- Switch to the 1-hour timeframe during the European morning, following the end of the Asian session.
- Mark the highest and lowest price levels between 11 p.m. and 8 a.m. GMT.
- These price levels represent the trading range that occurred during the Asian session. Note that this range may not necessarily be sideways. It doesn’t need to be. Only the high and low are important for this strategy. Once we have identified the range, we look for a breakout of either the high or low of the Asian range to determine a trading condition. Remember, this breakout needs to be in the direction of the MACD trend on the daily timeframe.
As determined earlier, firstly, confirm that the MACD trend on the daily timeframe is bullish.
- If the MACD trend is bullish, look for a breakout of the Asian range in the upside direction. Enter a long trade at the moment the price breaks above the high of the Asian range; no need to wait for a close.
- Place the stop loss order at the low of the Asian range.
- Set the profit target as the height of the range projected. For example, if the range was 50 pips, the take profit target would also be 50 pips to the upside.
- Set the stop loss to a similar distance (around 50 pips) to manage risk.
As determined earlier, firstly, confirm that the MACD trend on the daily timeframe is bearish.
- If the MACD trend is bearish, look for a breakout of the Asian range in the downside direction. Enter a short trade at the moment the price breaks below the low of the Asian range; no need to wait for a close.
- Place the stop loss order at the high of the Asian range.
- Set the take profit target as the height of the range projected. For example, if the range was 30 pips, the take profit target would also be 30 pips to the downside.
- Set the stop loss to a similar distance (around 30 pips) to manage risk.
Avoid Taking Trades on Conflicting Signals:
Do not take any trades if the price breaks the Asian range in the opposite direction of the MACD trend on the daily chart.
- For example, if the MACD trend is bullish, do not enter a trade if the price breaks the range to the downside.
- If the MACD trend is bearish, avoid trading if the price breaks the range to the upside. The PipStorm Breakout Strategy is designed to capture the potential momentum and profit opportunities that arise from breakouts during the Asian session. Remember to practice proper risk management and adapt the strategy to your trading style and preferences. Enjoy riding the pip storm to trading success!
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