The British Box Breakout trading strategy for Forex is a surprisingly simple and yet effect trading method. It is based upon the principles of ‘breakout trading’ and provides a disciplined and structured event from which to try and profit.
It is an easily understandable trading approach with limited reliance on either indicators or technical analysis. However this does not mean that it is any less effective than many more complicated systems.
There is often a misconception among traders, particularly those that are new to Forex, that you need to have a chart full of indicators to find good trading opportunities.
Most experienced traders will however tell you that this is far from being the case.
You don’t need a complicated strategy to make money.
If you have already trodden the path of loading up your chart with indicators are still not getting success, then getting back to basics is the way to go.
Using simple and easily replaceable strategies with good money management rules is one of the most effective ways to build your profits.
The box breakout strategy is a broad term. It covers a particular method of approaching the chart and identifying opportunities.
The ‘box’ referred to in the title of this method represents a set of barriers surrounding the current market price action. How and where you set these will be down to the individual nuances of the strategy.
The box is constructed from two vertical levels. These measure the start and end point of the period to be analysed.
The upper and lower level represent the high and low point of the market over this selected time period. The box itself may be square or rectangular in shape. This really depends on how you apply the system to your method.
Essentially the box shape is used to highlight a constrained range of movement. It also defines a set of levels where a breakout in price is likely to occur. When the price ‘breaks’ from either side of the box you should take this as a signal to go ‘long’ or ‘short’ the market in the direction of the break.
The box defines the breakout level. Here a break of the of the box triggers orders ‘long’ in the direction of the break at open.
Variations of the Box Breakout Strategy
There are several variations that you can use when adopting this strategy. Possible avenues that you could explore would be to change the start and end of the box time, the thresholds for entering a trade and also the take profit levels that you use.
An examlpe of how you could use this strategy could be to use a one hour box on a low time-frame chart. A 15 minute chart would make a good choice. Your trade would be to enter if the price was to break out of this box, going long or short depending upon the price action.
This would give short time-frame trades. However equally you can make use of longer time periods such as 4 or 8 hours. It is also common to draw your box across an entire trading session. Here you would use the high and low of the range as the top and bottom of the box. The sides of the box would be the start and end of the session. The aim would be to capture any breakout that occurred from the previous trading range.
Box breakout trading systems are commonly used in this scenario as they define market movement where a break in market activity is at its highest. When trading at these times you need a strict strategy to follow and to keep your head.
Perhaps one of the greatest benefits of using a box breakout Forex strategy comes from its simplicity. Systems that are based around this principle are easy to understand. They are also easy to trade and master. For a trader with limited trading experience, they offer a great strategy where profits can regularly be booked.
Defined entry points allow the trader to take a mechanical approach to order entry. Similarly he can also define profit targets where orders can be closed out. This helps to overcome much of the subjectivity which inexperienced traders struggle to deal with.
Another key benefit for the trader is that trading becomes more time effective. There is little screen watching required other than to confirm it a trade has triggered. This is particularly true if you define your trading parameters around particular points in the day. Major market opening session times are a good example here.
For those that want to limit their time trading and still generate high profits this makes it worthy of consideration .