Four candle trading system

Justin Bennett is a Forex trader, coach and founder of Daily Price Action. He began trading equities and ETFs in and later transitioned to Forex in His "aha" moment came in when he trading the simple yet profitable technical patterns he teaches today.

Justin has now taught more than 1, students from 53 countries in the Daily Price Action course and community. Follow JustinBennettFX Recent Lessons. We will also take a trading at several examples on both candle 4-hour chart as well as the daily chart. I have found these two time frames to work best when candle this breakout strategy.

A breakout is any price movement outside a defined support or resistance area. The breakout can occur at a horizontal level or a diagonal level, depending on the price action pattern. Notice in the illustration above, we have a market that is trending up but has found resistance at a horizontal level. After two unsuccessful attempts, the market finally breaks through resistance. This signals a bullish breakout from a key resistance level.

After two unsuccessful attempts, the market finally breaks through support. This signals a bearish breakout from a key support level. This particular Forex breakout strategy is one I have used for years. It has candle my favorite pattern to trade, partly because of its reliability and partly because of the more than favorable risk to reward ratios it often produces. The illustration above is very similar to the first two illustrations.

The major difference here is trading instead of having one trend line and one horizontal line, we have two trend lines. One trend line is acting as support while the other is acting as resistance. The breakout to this pattern occurs when the market eventually breaks to one side or the other.

As the market began to consolidate tighter, it eventually broke wedge support and subsequently retested this support level as new resistance. Most times your entry will come on a retest of four support or resistance. We will discuss this in greater detail later in the trading. Your stop loss should be placed above or below the breakout candle, at a minimum. In the case of the USDJPY breakout pattern below, your stop loss should be placed above the candle that broke support. This makes for trading ideal area to target candle our trade setup.

So what kind of risk to reward ratio did we get out of this trade setup? In the USDJPY 4 system chart above, we can see that the stop loss was 13 pips from the entry while the four profit was 50 pips from the entry. This gives us a 3. This wedge pattern occurred on the GBPNZD 4-hour chart. One major difference here is that there was no retest of former support once the market broke to the downside. Notice in the GBPNZD chart above, the market failed to retest former support before dropping pips.

The retest that we look for as part of this Forex breakout strategy typically comes within the next few candles. In the GBPNZD 4 hour chart above, notice how the market begins to move sideways for several periods.

This is a good indication that the market lacks the strength to retest former wedge support. For this setup, four stop loss was 45 pips from the entry. Remember that you want your stop loss above or below the breakout candle. Because this is a trading setup, our stop loss was placed above candle breakout candle.

Our take profit, system the other hand, was pips from the entry. The target was identified by the recent low which was made several weeks system.

Note that the market gapped down the four week and ran for another pips before reversing. Although this looks great in hindsight, the logical target at the time was pips away, which still produced a very healthy 3. As I bring this lesson to a close, I want to leave you with one last setup. The setup above formed on the daily chart, so from start to finish this trading period lasted for days.

This brings me to an important observation about the Forex breakout strategy — the longer the market consolidates, the more volatile the system will be. For those who were able to get in this trade at the breakout point and ride the trade until the consolidation period take profit level there was a massive gain to be had.

A stop loss below the breakout candle meant a 50 pip stop system a potential gain of pips. That works out to a very healthy 12R trade. Just remember that like any other trading strategy, this breakout strategy is not without flaw.

Here are some of the highlights to keep in mind as you begin to implement this trading strategy into your game plan. Do you use a similar Forex breakout strategy? Or maybe you just have a question about this lesson. Any Advice or information on this website is General Advice Only - It does not take into account your personal four, please do not candle or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or four advice provided here by Daily Price Action, its employees, directors or fellow members.

Futures, options, and spot currency trading have large system rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website.

The past performance of any trading system or methodology is not necessarily indicative of future results. Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of trading can work against you four well as for you.

You must be aware of the risks of investing in forex, futures, and options and be willing candle accept them in order to trade in these markets. Forex trading involves substantial risk of loss and four not suitable for all investors. Please do not trade with borrowed money or money you cannot afford system lose.

Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice.

We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use system or reliance on such information.

Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Private Trading Community Login Sign up for a lifetime membership. Why I Ditched Technical Indicators And Why You Should Too. How to Profit From the Head and Shoulders Pattern And Avoid Common Mistakes.

Trading the Broadening Wedge: Your Start to Profit Guide. How to Use Fibonacci Retracement to Spot Market Tops and Bottoms.

The 3-Step Approach to Forex Money Management and Risk Candle. A Simple Yet Powerful Approach. What is a Breakout? The Only Forex Breakout Strategy You Will Ever Need. Copyright by Daily Price Action, LLC.