Breakdown Trading VIP

The construction of a breakdown system includes the following steps:

1. Determination of the current volatility and the breakdown threshold. The current volatility, in this case, is defined as the difference between yesterday's daily high and the daily low. The breakdown threshold is set at 70-75% of this value.

2. Setting pending buy and sell orders.

3. Entering into a transaction, placing stop loss and take profit orders. Breakouts occur, as a rule, during periods of consolidation. As can be seen, during the 3 trading bars, there was a decrease in volatility (consolidation), as a result of which the breakdown levels gradually approached the level of the current price, until a breakthrough occurred.

4. Position tracking - setting trailing stop tracking orders as the price moves. As in the trend system, the Bollinger bands are a convenient means of setting trailing stops here. 

5. Exit from the transaction. The exit is made either when the price reaches the take profit level, or by a trailing stop or by time. A common option for exiting transactions in systems for a breakout of volatility is to exit at the end of the trading day.