Trading Strategy – Weekly high and low break out

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Weekly high and Low Breakout Strategy

The weekly high and low break out strategy is one of the simplest and easy to understand. When combined with other elements, such as price action and the overall trend of the market, traders will be able to trade at ease without overcrowding their charts with tons of indicators.

The weekly high low break out method is not a new technique and is widely used by members of the trading community. What can make this method really profitable is when you apply your knowledge to the markets. Thus, simply buying and selling on the break out might not yield profitable results all the time. However, this can be improved when you use it in combination with your own trading experience.

What’s unique about the weekly high and low break out method is it’s simplicity. This strategy allows traders to bring their own analysis skills which can be used in addition to the method.

 

Trading the weekly high low break out

  • As the strategy suggests, we stick to the 4-hour chart time frame with the period separators on the MT4 trading platform. This chart gives you the weekly price action.
  • The charts are typically prepared on a Sunday and this can give a lot of time to traders to analyze the various markets and pick the trades that show more potential. Due to the fact that the markets are closed over the weekends, traders are also prone to less distraction.
  • Once the 4-hour chart is set up with the weekly period separators, the next step is to plot the high and low of the previous week. This can be done by making use of the horizontal line tool from the MT4 platform.
  • After the previous week’s high and low levels are set, traders can then look for further filters. For example, looking at the weekly candlestick patterns can give some insights as to which markets are indecisive (doji’s) and should be approached with caution, or which markets are bullish (or bearish) and could indicate a turnaround in price.
  • When you have an idea of how the previous week has closed, you can then pick out the trades that have the most potential. From these filtered trades, the next step is to simply buy on a 4-hour candle close above the high or below the previous week’s low.
  • It is always best to wait for the first day (Monday) to close and then prepare to go long or short in the market. In other words, wait for the first four H4 candles after which you can trade using this method.
  • You can hold the trade into Friday’s closing session with stops being placed at your discretion. Stops can be placed at the key pivot high and low points.

 

Let’s illustrate this strategy on the S&P500 CFD instrument shown below.

 

Weekly High Low Breakout Trading Method
Weekly High Low Breakout Trading Method

 

The chart above shows the 4-hour chart time frame. Although the levels plotted are the previous week’s high and low, eyeballing the chart can reveal a pattern.

In the 9-weeks that we see in the above chart we can see that there have been four profitable trades with two losing trades and three weeks of no trade at all. This method can be further tweaked by using price action methods and also understanding the broader market (ex: the bull market rally in the S&P500).

 

Who can benefit from this rather simple approach to trading?

As mentioned earlier, this trading strategy is not suitable for all traders, especially beginners. Traders need to have some experience of the markets and most importantly build familiarity with the price action methods of trading.

Understanding the fundamentals in the market can be of great value addition as it can help you to understand if you are correctly positioned in the market or not.

 

 

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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