Buy strategy parameters
Indicator: Donchian Channels (Period 20)
Entry trigger: Highest 20, High = High price; Donchian Channels 20 < Close Price
Exit trigger (Take Profit): Donchian Channels 20 > Open Price
This is a trend-following strategy designed specifically for Broadcom Inc. (AVGO) on the M15 time frame. The strategy focuses exclusively on buying opportunities and is based on the breakout of the highest price over the last 20 candles in the direction of the prevailing trend.
How it works
The strategy identifies a strong upward trend using the Donchian Channels with a 20-period setting. A buy position is opened when the current candle closes above the middle line of the Donchian Channels, and the highest price of the candle breaks above the maximum price of the last 20 candles. This breakout signals a continuation of the upward trend.
To maximize potential profits, the position remains open until the opening price of the current candle falls below the middle line of the Donchian Channels. This exit condition ensures that the trade captures the majority of the trend movement while avoiding unnecessary early exits. In a strong trending market, this method allows for maximum gains as long as the trend persists.
Why this strategy is viable
- Trend-following foundation: This strategy is built around a classic trend-following approach, which is a time-tested method for capitalizing on large price movements. By aligning with the overall market momentum, traders increase the likelihood of capturing significant profits.
- Clear entry and exit criteria: The use of Donchian Channels provides a structured and systematic way to determine both entry and exit points. By focusing on breakouts of the 20-period high, it ensures that trades are initiated only when there is strong upward pressure, reducing the chance of entering false moves.
- Optimized for strong trends: The exit strategy — closing a position when the opening price drops below the Donchian Channels — protects profits by keeping positions open as long as the trend remains strong. This trailing stop approach is particularly effective in capturing prolonged trend movements without being prematurely stopped out.
- Simplicity with high potential: The strategy relies on only a few key indicators, making it easy to implement while providing significant upside in trending market conditions. This simplicity, combined with clear risk management rules, makes it accessible even for less experienced traders.
By focusing on trend continuation, this strategy seeks to capitalize on sustained upward movements in Broadcom Inc. (AVGO) stock, making it a reliable choice for traders aiming to profit from significant price trends.