Asian Zone Breakout System

Introduction to the Asian Zone Breakout System

We have identified strategies that can be traded during the New York and London time zones. This strategy is the breakout strategy for the Asian time zone. We should not forget that our brothers in Asia would be sleeping by the time the New York time zone is very active. So it is only fair that a trading strategy for them is devised.

Trades are taken on just the currency pairs which are active during the Asian time zone. It requires a certain set of indicators, which are contained within the template file.

Indicators Used:
The indicators for this strategy are as follows:

  1. I-ParamonWorkTime: Set the time frame to 00:00 to 03:00GMT. You must take care of the GMT offset as described for the London and New York breakout strategies.

This indicator is a customized MQL4 file. If you want it, you can simply download it from this zipped file right here.

The Strategy

The strategy is to identify a certain time frame within the Asian trading zone, demarcate the highs and lows within this zone, and trade a price breakout of either the high or the low. In other words, we trade the breakout of price on either side of the box. This strategy is traded on the 1 hour chart using the Yen crosses.

The time frame is within four hourly candles: 00:00GMT to 03:00GMT.

Long Trade

  1. Use your line tool to draw a trend line across the highest point of the 4 candles in the zone, as well as the lowest point of the 4 candles.
  2. Watch out for a breakout from the upper trend line by future candles within the same trading day.
  3. Wait for a pullback, then place a long entry at the upper trend line.

We demonstrate this trade setup in the snapshot below:

AsBrk_1

The snapshot shows the shaded areas which encapsulated the price action within the marked time zone. Eventually, the price action broke out to the upside, retreated a little before continuing its move upwards.

Stop Loss

The stop loss is set to 10 pips. Once the trade has gained 30 pips, start to trail the trade with a 10-pip difference. However, if you are trading the GBPJPY, you have to use a larger stop loss as the currency pair is very volatile.

Take Profit

The Take Profit is set to 50 pips maximum. If it gets to 50 pips and shows more movement potential, you can keep on trailing the price action northwards.

Short Trade
The short trade is executed as follows:

  1. Use your line tool to draw a trend line across the highest point of the 4 candles in the zone, as well as the lowest point of the 4 candles.
  2. Watch out for a breakout from the lower trend line by future candles within the same trading day.
  3. Wait for a pullback, then place a short entry at the lower trend line.

We demonstrate this trade setup in the snapshot below:

AsBrk_2

Here we see a situation where the price action was already heading to the downside even within the shaded zone. However, the breakout candle only occurred 2 candles after price left the zone. It made a brief pullback before continuing its movement down south. This was a particularly aggressive trade which delivered 100 pips on the average.

Stop Loss

The stop loss is set to 10 pips. Once the trade has gained 30 pips, start to trail the trade with a 10-pip difference. Do not make your stop loss this tight if trading the GBPJPY due to the high volatility of this currency pair.

Take Profit

The Take Profit is set to 50 pips maximum. If it gets to 50 pips and shows more movement potential, you can keep on trailing the price action downwards.

Conclusion

This strategy is quite simple and unlike its counterpart strategies which utilize the 15-minute chart and end up using a lot of candles, the use of the 1 hour chart in this case reduces the clutter on the charts, making it easier to identify the trade setup and enter the trades.

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