The Directional Breakout MT4 indicator reacts fast to short-term trend changes which makes it perfect for scalping and day trading.
A short-term bullish trend occurs when the indicator draws green histogram bars above the zero level.
A short-term bearish trend occurs when the indicator draws red histogram bars below the zero level.
Yellow bars represent a flat market. Wait for a new trade opportunity to arrive or keep your current position open.
Combining the Directional Breakout forex indicator with a longer-period trend-following indicator will yield better trade performance.
For example, use together with 100 period SMA or 75 period EMA.
The overall trend is bullish when price trades above the 100 period SMA or 75 period EMA.
Conversely, the overall trend is bearish when price trades below the 100 period SMA or 75 period EMA.
Open short-term trades in the direction of the overall trend and ignore trading against the overall trend.
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Indicator Chart (GBP/USD M5)
The GBP/USD 5-Minute chart below displays the Directional Breakout Metatrader 4 Forex indicator in action.
Basic Trading Signals
Signals from the Directional Breakout MT4 forex indicator are easy to interpret and go as follows:
Buy Signal: Open buy trade position when the Directional Breakout MT4 changes color from yellow to green and the overall trend is upward.
Sell Signal: Open sell trade position when the Directional Breakout MT4 changes color from yellow to red and the overall trend is downward.
Trade Exit: Use your own method of trade exit.
Directional Breakout + Forex Trend Candlestick Painter Day Trading Strategy
This strategy combines the breakout signal from the Directional Breakout MT4 Indicator with trend confirmation from the Forex Trend Candlestick Painter Indicator.
The Directional Breakout changes color from yellow to green or red to indicate breakout momentum.
The Candlestick Painter highlights bullish or bearish trend phases by coloring consecutive candlesticks green for uptrend or red for downtrend.
By combining the breakout signal with a clear trend color, this strategy aims to capture directional moves during active trading hours and avoid false breakout signals.
This strategy works best on 30-minute to 4-hour charts, making it suitable for day trading and intraday setups.
Trade entries are taken when both breakout signal and trend alignment confirm a directional move.
This method helps reduce false signals and allows traders to stay with strong intraday or multi-hour moves with defined entries and exits.
Buy Entry Rules
- Directional Breakout indicator changes color from yellow to green, signaling breakout momentum upward.
- Forex Trend Candlestick Painter shows a series of green candlesticks, confirming bullish trend context.
- Enter a buy trade at the close of the candle where breakout color changed or at the open of the next candle.
- Place stop loss a few pips below the recent swing low or below the breakout candle low.
- Set take profit at the next significant resistance level, prior swing high, or when trend color reverses from green to red.
Sell Entry Rules
- Directional Breakout indicator changes color from yellow to red, signaling breakout momentum downward.
- Forex Trend Candlestick Painter shows a series of red candlesticks, confirming bearish trend context.
- Enter a sell trade at the close of the color change candle or at the open of the next candle.
- Place stop loss a few pips above the recent swing high or above the breakout candle high.
- Take profit at the next support level, prior swing low, or when the candlestick painter changes from red to green.
Advantages
- Combines breakout momentum and trend confirmation to improve trade quality.
- Clear and simple rules, easy to apply on multiple currency pairs and timeframes.
- Well suited for day trading and capturing strong intraday moves.
- Stop loss and take profit are defined with recent price structure, improving risk management.
- Trend confirmation helps avoid false breakouts that reverse quickly.
Drawbacks
- False breakouts can still occur during low volatility or consolidation periods, despite trend confirmation.
- Patience is required, as not every color change results in a strong breakout and some trades may end with small gains or hit stop loss.
Case Study 1 – Buy Trade
On USDCHF H1 during the London and New York session, the price had been consolidating.
The Directional Breakout indicator switched from yellow to green at the end of the consolidation phase while the Candlestick Painter showed a green series of candles forming.
A buy trade was entered at the close of that breakout candle.
Stop loss was placed 12 pips below the recent swing low.
Price rallied strongly over the next hours and reached a prior resistance zone, yielding a profit of approximately 68 pips.
Trend confirmation helped avoid a false breakout and captured a solid move.
Case Study 2 – Sell Trade
On EURJPY M30 after a minor retracement, the Directional Breakout changed from yellow to red while the Candlestick Painter displayed a series of red candles confirming bearish momentum.
A sell trade was executed at candle close with stop loss 8 pips above the recent swing high.
Price moved downward over the next several candles and hit a support zone, locking in a profit of about 54 pips.
The combined setup avoided noise and captured a clean intraday reversal.
Strategy Tips
- Prefer currency pairs with decent volatility like EURJPY, USDCHF, GBPUSD, and AUDUSD for clearer breakout moves.
- Adjust take profit levels based on recent support and resistance rather than fixed pip targets to suit each pair’s volatility.
- Consider closing part of the position at an intermediate target and trailing the stop on the rest to maximize gains while protecting profits.
- Test the strategy on a demo account first to find which pairs and timeframes match your trading style best.
Download Now
Download the “directional-breakout-indicator.mq4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: Chart pattern indicator
Customization options: Variable (price, method, length, alertsON) Colors, width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: trend
