The Power Breakforex system is a box breakout strategy (Asian Breakout Trading).
Time Frame: 15minutes or 1 hour charts
Trading times:
06H00 – 08H00London time
Currencies traded:GBP/USD and EUR/JPY
Skill levelrequired: Low – intermediate
This is a simple,yet powerful method which anyone can use to profit from the Forexmarket.
Leveragerecommended: Medium leverage maximum 5:1
The Power Break forex system isideally suited for trading the GBP/USD
(Pound/Dollar) and the EUR/JPY(Euro/Yen). This is for four reasons:
1. Both of these currency pairs tend tohave higher volatility than the other major or minor pairs, and thisis essential for thebreak-out system employed by the Power Breakmethod. Once acurrency starts to move through theentry zones, I want it tocontinue for at least a minimum distance sothat a healthy profit can be taken.
2. Both currencies tend to present goodopportunities at the end of the Asian session. The Pound because itis traded actively during the European session (which follows theAsian session) and theEUR/JPY because if it has a small rangeduring Asian trading, it will often explode at the start of theEuropean session. And that’s exactly what I want!
3. Both currencies tend to offerlengthy trends once they start moving in a direction, and thisenables us to capture a significant profit without enduring frequentretracements.
4. These two currency pairs arenon-correlated. This means that I am not trading two currenciesagainst the US Dollar. When currencies are correlated, they tend tomove in similar patternsat the same time. In this case, the GBP/USDmight be rising,whereas the EUR/JPY might be static or falling. Thishelps toeven out the trading performance and reduce risk – and thatisextremely important. Risk is the bigkiller of trading accountsand careers.
Chart setup
The chart setup is very simple. Foreach currency, I simply need the 1 hour or 15 minutes chart, withmajor support and resistance lines,
Fibonacci lines and trend lines drawnin.
Entering the trade:
The trading entry method is verysimple. I place two break-out orders outside of the Asian boundaries.There are two things that you need tonote when using this strategy,first is the timing of trade and second is the value of the range.
EUR/JPY
Step 1 Firstly, I measure thehigh and low from 22:00 to 06:00
London time. This is called the “powerrange”
Step 2 I then place long andshort orders 10 pips outside this range,
which are automatically triggered byyour trading platform if the pricereaches those levels.
Important: If the power range exceeds80 pips, I do not place anyorder.
Step 3 I also set a stop loss of40 pips and a profit target of 40 pips. If
and when the price reaches the profittarget or the stop loss, yourtrading platform should automaticallytrigger the trades for you.
Step 4 Close the trade ifneither of these is hit by 18:00 London timeand repeat the process the next day.GBP/USD
Step 1 GBPUSD: Firstly, Imeasure the high and low from 00:00 to08:00 London time (the power range).This is called the “power range”
Step 2 I then place long andshort orders 10 pips outside this range,which are automatically triggered byyour trading platform if the pricereaches those levels.
Important: If the power range exceeds80 pips, I do not place anyorder.
Step 3 I also set a stop loss of40 pips and a profit target of 40 pips. Ifand when the price reaches the profittarget or the stop loss, yourtrading platform should automaticallytrigger the trades for you.
Step 4 Close the trade ifneither of these is hit by 18:00 London timeand repeat the process the next day.Let’s have a look at a few examples:
The simplest way to draw this on yourcharts is to create a box using vertical and horizontal lines likethe chart below. This 15 minute chart for the EUR/JPY shows the powerrange (22:00 – 06:00 London time) on a particular day.
I have drawn two blue vertical lines onthe chart to box the power range period between them, and then I havedrawn two horizontal redlines on the chart to show the high and thelow of the price action during that period. In this case the powerrange was from 165.08 to 165.52 – a range of 44 pips. As this wasless than 80 pips, I could set two breakout entries: One at 164.98(to sell) with a stop loss at 165.38, andanother at 165.62 (to buy),with a stop loss at 165.22. The targets in both cases are set at +40pips.
Let’s have a look at a GBP/USDexample:
This 15 minute chart for the GBP/USDshows the power range (00:00 – 08:00 London time) on a particularday. I have drawn two blue vertical lines on the chart to box thepower range period between them, and then I have drawn two horizontalred lines on the chart to show the high and the low of the priceaction during that period.
In this case the power range was from2.0477 to 2.0513 – a range of 39 pips. As this was less than 80pips, I could set two breakout entries: One at 2.0467 (to sell) witha stop loss at 2.0507, andanother at 2.0523 (to buy), with a stoploss at 2.0483.
The targets in both cases are set at+40 pips. In this example, it took the Pound another 8 hours to reachthe 40 pip profit target, but eventually it did.
Here’s a great example of theEUR/JPY. Notice how the power range held for several days, and evenafter the orders were set (when thebox closed) the power range wastested on both sides before the pricefinally broke out upwards. Thetarget of +40 pips was very quickly reached before the price began todrift lower again.
Here’s one more example of theEUR/JPY. In this example, the power range was between 168.62 and168.95. That means I would place a buy entry at 169.05 and a sellentry at 168.52. Notice how I got anentry to sell very shortly afterthe power range ended, and the price
held down near the entry for some timeafter that:
The next chart shows the result: Wemoved all the way down to167.80 – about a 70 pip move. I willdiscuss how to optimize profits inthe next section (tips forexperienced traders), but normally I would have taken the 40 pips thesystem advises:
The Power Break method isextremely simple to use, and yet very effective. The technique iseasy to master and there is little timerequired to manage the tradesonce the orders are placed.
The results will vary with marketvolatility, and has been shown toproduce 200-400 pips per month withdrawdowns of about the same magnitude.
