Breakout Expert Advisor - profitable breakout strategy for EUR/GBP
The market works 24/7but the trading activity is not evenly distributed. As we know, the volatility on the currency market varies over time, and there is a simple explanation. A day is divided into trading sessions, which determine the opening of the largest world financial centers. The market behavior changes drastically; while the yen is most popular during Tokyo's trading session, the pound and the euro, for example, do not demonstrate any significant activity until the opening of the European banks.
In today's Breakout Expert Advisor we are dealing with a breakout strategy designed for a long trend movement. Actually, channel strategies are one of the most common on the market, and for good reason. If correctly implemented, tactics based on breakout levels can bring in steady income. And the periodicity at which the market volatility, has long been studied. All that remains is to try to derive one's own benefit from these metamorphoses.
Characteristics of Breakout Advisor
The author of the Expert Advisor offers the following parameters to work with him.
- Timeframe: H4;
- Trading hours: European session;
- Currency pairs: EUR/GBP.
Description of settings available in the Expert Advisor
- TimeStart - the time when the pending order is set;
- TimeStop - the time to delete the pending order;
- StopLoss - the size of the stop loss;
- TakeProfit - the size of the take profit;
- Lot - position volume;
- Otstup - the indent from the edge of the candle to set an order;
- Min_channal - minimum channel size;
- Max_channal - maximum channel size;
- MA_Period - the period of the moving average;
- MA_Otstup - the indent of the moving average;
- Magic - the unique number of the advisor.
How Expert Advisors Work
The Breakout Expert Advisor has two main parameters: TimeStart and TimeStop. The first is responsible for the installation time of the order, the second is responsible for the time of its removal. The order is placed once, and after triggering a new one does not open (even if the closing time has not come yet). When TimeStart is triggered, a new order is placed pending stop order, the direction of which is determined by the position of the MA.
Rules for opening a buy deal:
- The size of the previous (closed) candle is larger than Min_channal and smaller than Max_channal.
- The MA is below the minimum of the candle at MA_Otstup points.
If the conditions are satisfied, the order is set at the level of the maximum of the candle plus Otstup.
Rules for opening a sell deal:
- The size of the previous candle is larger than Min_channal and smaller than Max_channal.
- The MA is higher than the maximum of the candle by MA_Otstup points.
If the conditions are satisfied, set the pending stop order at a distance of at least candle minus Otstup.
Testing of Breakout Expert Advisor
The Asian session opens at 2 a.m. and closes at 12 p.m. Moscow time. As one would expect, the breakout strategy works extremely poorly during periods of weak player activity. During periods of low volatility, as we know, it is better to trade on a breakout strategy.
At the opening of Europe there is often a change in the main trend, which is ideal for the advisor Breakout. The choice of EUR/GBP pair also plays a role, showing the greatest activity in European trading.
During the American session, the trend that Europe has already begun is usually maintained. The Expert Advisor is still showing profit, but the result is not impressive.
The main drawback of Breakout - a large number of input parameters and poor adaptability. Let's try to modify the Expert Advisor by replacing the constants with a dynamic value of the average volatility.
Modification of the advisor by ATR
The new version of the Breakout Expert Advisor takes the ATR indicator readings as the basis, and the difference in the parameters is achieved through the coefficients. Optimization by the main coefficient showed a comparable result to the previous tests. But, the main advantage is that this version of Breakout is able to adapt to the current volatility in the market.
Conclusion
The Breakout Expert Advisor is proof that simple patterns still work. The main thing here is the right approach and the use of proven techniques. This strategy is great for beginners, allowing you to get acquainted with the basic principles of trading and better comprehend your own trading.
In our testing we took a rather large initial deposit and a small lot as the basis. Moreover, we considered only one currency pair, and you can experiment with similar "European" currency pairs, for example EUR/CHF or GBP/CHF. With this in mind, you can conduct your own tests in order to increase the performance of the Expert Advisor and to test its work on small depots.