Trading Strategies Revealed – “ZigZag Support & Resistance Breakout” review

Breakout trading strategy “ZigZag 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. A stop loss should be placed at the opposite support/resistance level with 1:2 Risk-to-Reward ratio. Support and Resistance levels are based on ZigZag indicator.

For our test, we have used a Trailing Stop 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 2010.01.01-2019.07.02 using Control Points modelling on GBPJPY-H1, with 1:2 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:

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:

Analysis Insights

1. “ZigZag Support & Resistance Breakout” trading strategy has produced 24.96% annualized ROI during 2010-2019 years using 1:2 leverage. Maximum drawdown comprised 37.54%.

2. Sell trades opened at positive MACD values brought more profit, while buy trades were more profitable at MACD values less than zero on D1 timeframe when trading “ZigZag Support & Resistance Breakout” trading strategy during 2010-2019. MACD shows trend direction and power, thus this pattern says that with an increasing (either up or down) long-term MACD value, the probability that a trend will reverse is higher and, therefore, the probability of a breakout of support and resistance lines is also higher.

3. We have analyzed data received from a test of “ZigZag Support & Resistance Breakout” trading strategy during 2010-2019 years and applied some filters such as Stochastic, SAR, Bollinger Bands, Accelerator Oscillator and Awesome Oscillator filters. As a result, the profitability of the strategy has increased from 24.96% up to 63.34% and its drawdown has reduced from 37.54% to 10.90% using leverage 1:2. Reducing the drawdown has allowed us to increase the leverage up to 1:5, which in turn, has resulted in annualized ROI increase up to 154.43%!

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.

Our company specializes on automated trading systems and trading indicators development for the most popular trading platforms, such as MetaTrader 4/5, NinjaTrader 7/8 and cTrader.

If you need your own automated trading software designed based on your individual requirements, make a request for a free consultation with our team of professional programmers and find out the cost and terms of your project development.

More detailed info about our services for particular trading platform you can get at the following pages of our web-site:

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cTrader https://nordman-algorithms.com/ctrader-programming