Trading Forex Breakouts with the Kijun Sen Envelope MT4 Indicator
The Kijun Sen Envelope MT4 Indicator is a highly profitable strategy (when applied correctly) which trades breakout opportunities in the market. The Kijun Sen Envelope MT4 indicator is made up of three lines which represent three moving averages.
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Kijun Sen Envelope MT4 Indicator Strategy and Trading Rules
The strategy is to look for a breakout opportunity. Most of the time, the price action is contained within the envelope lines, which signifies a market that is in consolidation. At some point, the price action will break out of the upper or lower envelope. This will occur when the momentum is high. The breakout is defined by a situation where a candle goes above the upper envelope and closes above it, or goes below the lower envelope line and closes below it.
Once this is established, watch out for when the price starts to retrace either downwards to the highest line, or upwards to the lowest line. Where there is a bounce or a rejection, this is where the entry is to be made.
If the price action is within the lines of the Kijun Sen Envelope indicator, then the market is deemed to be in consolidation and there will be no opportunity for trading.
Kijun Sen Envelope MT4 Indicator Long Entry Rules
The trader should go long on the currency pair when the following setup is seen on the charts:
- The price action candles are in an uptrend and have crossed above the highest envelope line.
- Wait for the candlesticks to start pulling back downwards. Once the candle touches the upper envelope line and closes without breaking it downwards, initiate a LONG trade using a BUY LIMIT entry. This setup is displayed below.
Stop Loss and Take Profit for Long Entry
The stop loss is set at a few pips (about 20-30 pips) below the middle envelope line. It is expected that if price goes below the upper envelope line, it should at least be supported by the middle envelope for resumption of upward movement. By the time the price action has gone below the middle envelope line, it is most likely that the price action has reversed and it would not make sense to keep the trade open.
For the Take Profit settings, the pointer to be used in making this determination is when price action has started to retreat below the envelope lines, which at this time have tracked the price movement upwards. You may also decide to use a fixed number of pips equivalent to two times or even three times the stop loss as the Take Profit point.
Kijun Sen Envelope MT4 Indicator Short Entry Rules
The rules for a short entry are as follows:
- The price action candles are in a downtrend and have crossed below the lowest envelope lone and closed below it.
- Wait for the candlesticks to start pulling back upwards. Once the candle is close to touching the lowest envelope line, initiate a SHORT trade using a SELL LIMIT entry, with the price at the lowest envelope serving as the entry price. This setup is displayed below.
Stop Loss and Take Profit Settings
The stop loss is set at a few pips (about 20-30 pips) above the lowest envelope.
For the Take Profit settings, the following parameters are used:
- Manual profit taking by closing the trade when the price action candles start to break above the lowest envelope, which at this time has been tracking the price downwards.
- A fixed target which is equivalent to two or three times the stop loss can also be used as the Take Profit point.
Precaution when trading with the Kijun Sen Envelope MT4 Indicator
The most important precautions to take with this trade are as follows:
- Trades on longer time frames perform best. Therefore, optimum results are seen with the 4hour and daily charts, but these require patience for the setups to align properly.
- Always consider resistance and support areas when deciding on where to take profit. For instance, if price has approached a clear support during a short trade, this will take precedence over the exit setups described earlier.
Recommended Time Frames for Kijun Sen Envelope MT4 Indicator
Technically speaking, you can use this MT4 indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.
Kijun Sen Envelope MT4 Indicator Download
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