Breakout trading strategy “Pivots Support & Resistance Breakout” is designed mainly for Forex and can be used on all currency pairs on any time-frame. Its rules state that:
A trader should place a buy order when price breaks through a resistance level. A sell order should be placed when price breaks through a support level. Support and Resistance levels are based on Pivots indicator.
For our test, we have used a Trailing Stop 30 pips which is launched after a trade has started and is modified each new 1 pip of profit. From our point of view, such approach allows to maximize profit and minimize drawdown. We have run the test for 2010.01.01-2019.07.11 using Control Points modelling on EURUSD-H1, with 1:18 leverage, without reinvestment, assuming spread equals 10 ticks, with starting balance $10,000. These are the main parameters of financial performance, that may allow you to evaluate whether this strategy worth your attention or not:
|ROI||# of trades||Winning ratio||Max. drawdown|
The following charts may give some possible insights on which filters to apply (time sessions, day of week limitation, trend strength threshold, overbought/oversold conditions, volatility range) to turn this strategy profitable should you decide to use this strategy in your investment portfolio:
1. “Pivot Support & Resistance Breakout” trading strategy has produced 36.36% annualized ROI during 2010–2019 years using 1:18 leverage. Maximum drawdown was 57.04%.
2.The most profitable trades were opened at a lower value of ADX when trading “Pivot Support & Resistance Breakout” trading strategy during 2010–2019. ADX shows the power of a trend and lower value of ADX means that the trend has just started. It means that the most profitable breakouts happened at the beginning of the trend.
3. The closer the price was to the upper band, the more profitable sell trades were opened. While the closer the price was to the lower band, the more profitable buy trades were opened on H4 timeframe. This means that the probability that price will reverse and the profitable breakout will happen is higher near the bands. Also, the most profitable trades were opened at a lower bands range when trading “Pivot Support & Resistance Breakout” trading strategy during–2019. Too large distance between Bollinger Bands means that the market is too volatile.
4.Trades that were opened at a too high and too low values of RSI brought more loses when trading “Pivot Support & Resistance Breakout” trading strategy during 2010–2019. While RSI shows the overbought and oversold zones it is reasonable not to buy at a higher value of RSI and not to sell at a lower value.
5. We have analysed data received from a test of “Pivot Support & Resistance Breakout” trading strategy during 2010–2019 years and applied some filters such as ADX, Gator, RSI, Stochastic, Bollinger Bands and others. As a result, the profitability of the strategy has increased from 36.36% up to 95.50% and its drawdown has reduced from 57.04% to 22.56% using leverage 1:18. Reducing the drawdown has allowed us to increase the leverage up to 1:24 and to use optimized stop loss, which in turn, has resulted in annualized ROI increase up to 189.66%!
If you decide to buy an EA, coded in accordance with the strategy and used for the test, or to make any amendments to the original strategy rules – please, feel free to contact us.
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