| Updated: September 15, 2025Forex trading strategy – breakout of the ‘first four-candle range’
You will learn about the following concepts
- Indicators used with this strategy
- Signals to look for
- Entry point
- Stop-loss
- Profit target
For this strategy, we will be examining the 1-hour chart of GBP/JPY. First, a trader needs to draw a horizontal line through the highest high and another horizontal line through the lowest low of the first four candles during the trading day (in our case, this is 10 June 2014). Next, the trader should wait for a genuine breakout of either of the two horizontal lines.
As soon as a breach of one of the horizontal lines occurs, the trader will need to switch to a lower timeframe (5 minutes, for example) and ensure that the entire body of the 5-minute candle has formed outside the respective horizontal line.
How can the trader confirm that the breakout is genuine? To go long, the trader must ensure that the 5-minute candle closes above the upper horizontal line, after which a pullback occurs (the next candle should turn the upper horizontal line into a level of support). To go short, the trader must ensure that the 5-minute candle closes below the lower horizontal line, after which a pullback occurs (the next candle should turn the lower horizontal line into a level of resistance).
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- Regulation: NFA
- Leverage: Day Margin
- Min Deposit: $100
Once the trader has confirmation that the breakout is genuine, he or she will enter the trade. The protective stop will be placed at the upper horizontal line for a short position and at the lower horizontal line for a long position. The profit target may be set 50 pips away from the entry point.
