The Power Break forex system

The Power Break forex system is a box breakout strategy (Asian Breakout Trading).

Time Frame: 15 minutes or 1 hour charts

Trading times:

06H00 – 08H00 London time

Currencies traded: GBP/USD and EUR/JPY

Skill level required: Low – intermediate

This is a simple, yet powerful method which anyone can use to profit from the Forex market.

Leverage recommended: Medium leverage maximum 5:1

The Power Break forex system is ideally suited for trading the GBP/USD

(Pound/Dollar) and the EUR/JPY (Euro/Yen). This is for four reasons:

1. Both of these currency pairs tend to have higher volatility than the other major or minor pairs, and this is essential for thebreak-out system employed by the Power Break method. Once a currency starts to move through the entry zones, I want it tocontinue for at least a minimum distance so that a healthy profit can be taken.

2. Both currencies tend to present good opportunities at the end of the Asian session. The Pound because it is traded actively during the European session (which follows the Asian session) and the EUR/JPY because if it has a small range during Asian trading, it will often explode at the start of the European session. And that’s exactly what I want!

3. Both currencies tend to offer lengthy trends once they start moving in a direction, and this enables us to capture a significant profit without enduring frequent retracements.

4. These two currency pairs are non-correlated. This means that I am not trading two currencies against the US Dollar. When currencies are correlated, they tend to move in similar patternsat the same time. In this case, the GBP/USD might be rising,whereas the EUR/JPY might be static or falling. This helps toeven out the trading performance and reduce risk – and that is extremely important. Risk is the big killer of trading accountsand careers.

Chart setup

The chart setup is very simple. For each currency, I simply need the 1 hour or 15 minutes chart, with major support and resistance lines,

Fibonacci lines and trend lines drawn in.

Entering the trade:

The trading entry method is very simple. I place two break-out orders outside of the Asian boundaries. There are two things that you need tonote when using this strategy, first is the timing of trade and second is the value of the range.

EUR/JPY

Step 1 Firstly, I measure the high and low from 22:00 to 06:00

London time. This is called the “power range”

Step 2 I then place long and short orders 10 pips outside this range,

which are automatically triggered by your trading platform if the price reaches those levels.

Important: If the power range exceeds 80 pips, I do not place any order.

Step 3 I also set a stop loss of 40 pips and a profit target of 40 pips. If

and when the price reaches the profit target or the stop loss, your trading platform should automatically trigger the trades for you.

Step 4 Close the trade if neither of these is hit by 18:00 London time and repeat the process the next day. GBP/USD

Step 1 GBPUSD: Firstly, I measure the high and low from 00:00 to 08:00 London time (the power range). This is called the “power range”

Step 2 I then place long and short orders 10 pips outside this range, which are automatically triggered by your trading platform if the price reaches those levels.

Important: If the power range exceeds 80 pips, I do not place any order.

Step 3 I also set a stop loss of 40 pips and a profit target of 40 pips. If and when the price reaches the profit target or the stop loss, your trading platform should automatically trigger the trades for you.

Step 4 Close the trade if neither of these is hit by 18:00 London time and repeat the process the next day. Let’s have a look at a few examples:

The simplest way to draw this on your charts is to create a box using vertical and horizontal lines like the chart below. This 15 minute chart for the EUR/JPY shows the power range (22:00 – 06:00 London time) on a particular day.

I have drawn two blue vertical lines on the chart to box the power range period between them, and then I have drawn two horizontal redlines on the chart to show the high and the low of the price action during that period. In this case the power range was from 165.08 to 165.52 – a range of 44 pips. As this was less than 80 pips, I could set two breakout entries: One at 164.98 (to sell) with a stop loss at 165.38, andanother at 165.62 (to buy), with a stop loss at 165.22. The targets in both cases are set at +40 pips.

Let’s have a look at a GBP/USD example:

This 15 minute chart for the GBP/USD shows the power range (00:00 – 08:00 London time) on a particular day. I have drawn two blue vertical lines on the chart to box the power range period between them, and then I have drawn two horizontal red lines on the chart to show the high and the low of the price action during that period.

In this case the power range was from 2.0477 to 2.0513 – a range of 39 pips. As this was less than 80 pips, I could set two breakout entries: One at 2.0467 (to sell) with a stop loss at 2.0507, and another at 2.0523 (to buy), with a stop loss at 2.0483.

The targets in both cases are set at +40 pips. In this example, it took the Pound another 8 hours to reach the 40 pip profit target, but eventually it did.

Here’s a great example of the EUR/JPY. Notice how the power range held for several days, and even after the orders were set (when thebox closed) the power range was tested on both sides before the pricefinally broke out upwards. The target of +40 pips was very quickly reached before the price began to drift lower again.

Here’s one more example of the EUR/JPY. In this example, the power range was between 168.62 and 168.95. That means I would place a buy entry at 169.05 and a sell entry at 168.52. Notice how I got anentry to sell very shortly after the power range ended, and the price

held down near the entry for some time after that:

The next chart shows the result: We moved all the way down to167.80 – about a 70 pip move. I will discuss how to optimize profits inthe next section (tips for experienced traders), but normally I would have taken the 40 pips the system advises:

The Power Break method is extremely simple to use, and yet very effective. The technique is easy to master and there is little timerequired to manage the trades once the orders are placed.

The results will vary with market volatility, and has been shown toproduce 200-400 pips per month with drawdowns of about the same magnitude.