The Busted Breakout System is a Forex trading strategy developed by Gabriel Grammatidis
The system is based on the psychology of market participants and is trend-based, meaning it can be
traded in various timeframes and can be traded across a range of currency pairs
The system benefits from an initial state of low volatility that allows a relatively tight stop at entry
The system is designed to take advantage of breakouts, which occur when the price of an asset
moves outside a defined support or resistance level with increased volume
The Busted Breakout System works by identifying a breakout and then waiting for a "busted" pattern
to emerge
A busted pattern occurs when the price of an asset breaks out of a support or resistance level but
then quickly reverses direction and moves back into the previous trading range
The system then enters a position in the direction of the breakout, with a stop-loss order placed at a
protected place
The Busted Breakout System is a highly profitable Forex trading strategy that can be used in all
timeframes, from very small to large, from 1 minute to daily charts
It is important to note that like any trading strategy, the Busted Breakout System requires discipline
and adherence to a trading plan
the Busted Breakout system is a trend following system that trades technical setups across multiple
FX pairs.
It confirms breakout failures with an expansion in volatility and uses a confluence of three
exponential moving average bands in various timeframes.
The system also uses selected leading indicators to confirm trades and a specific pattern that allows
trading against trapped traders.
A significant support or resistance level in trading, according to many strategies including the Busted
Breakout System, is typically defined by a price point at which there is a large amount of buying or
selling activity, causing the price to bounce back or reverse when it reaches this level
More specifically:
Support Level: This is the price level at which demand is thought to be strong enough to prevent the
price from falling any further. The logic dictates that as the price drops towards support and gets
cheaper, buyers become more inclined to buy, and sellers become less inclined to sell. Once the
price reaches the support level, it is likely to bounce back upwards.
Resistance Level: This is the opposite of a support level. It is the price level at which selling is thought
to be strong enough to prevent the price from rising further. The rationale is that as the price rises
towards resistance, sellers become more inclined to sell and buyers become less inclined to buy.
When the price reaches the resistance level, it is likely to bounce back downwards.
These levels are not fixed and can change as market dynamics shift. The more times the price tests a
level of resistance or support without breaking it, the stronger that level of resistance or support is.
In the context of the Busted Breakout System, these levels are significant because the strategy relies
on price breakouts from these levels, and the subsequent return to these levels (the "busted"
pattern), to make profitable trades.
However, the specific criteria that the Busted Breakout System uses to define a "significant" support
or resistance level is not provided in the information available up to my knowledge cutoff in
September 2021. If you want the most accurate and detailed information, I would recommend
reviewing Gabriel Grammatidis's course materials directly or reaching out to him or the Van Tharp
Institute for clarification.
As a technical trader, there are several factors you can consider when determining significant
support levels:
Repeated Price Reversals: One of the most common ways to identify significant support is to look for
price levels where the price has repeatedly reversed upwards. The more times a price has bounced
off a level, the more significant the support is considered to be.
Historical Price Levels: If a price level has acted as support or resistance in the past, it's likely to do so
again in the future. Traders often look at long-term charts to identify such levels.
Round Numbers: Traders often place orders at round numbers, causing prices to bounce when they
reach these levels. For example, if a stock is falling, it might find support when it reaches $50 or
$100.
Moving Averages: Many traders use moving averages as dynamic support and resistance levels. The
50-day and 200-day moving averages are commonly used in this way.
Fibonacci Retracement Levels: Some traders use Fibonacci retracement levels to predict potential
support and resistance levels. These are levels where the price could potentially retrace a portion of
its previous move.
Volume: Support and resistance levels are more significant if they coincide with high trading
volumes. Traders often use volume-based indicators such as the Volume Profile, which shows at
what price levels the most trading activity has occurred.
Remember, technical analysis is more of an art than a science. Different traders might interpret the
same chart in different ways, and there's no guarantee that prices will behave as expected. As
always, it's important to use proper risk management and to have a well-thought-out trading plan.
This script plots a line at a support level of 5000 and checks if the low price for each bar falls within
50 points of this level (creating a "zone" of support). If a bar's low price falls within this zone, the
background color of the chart will turn green.
Please note that Pine Script doesn't provide a built-in function to count the number of touches. If
you want to keep track of the number of touches, you would need to implement a custom counter.
Also, in real trading conditions, support levels are often not exact levels but rather areas or zones
where price tends to rebound. As such, in the script above, we have defined a "touch" as the low
price coming within 50 points of the support level.
As always, you should adjust this script to meet your own trading requirements and risk tolerance.
//@version=5
indicator("Busted Breakout System - Combined", shorttitle="BBS Combined", overlay=true)
// Parameters
ema8 = ta.ema(close, 8)
ema21 = ta.ema(close, 21)
ema50 = ta.ema(close, 50)
atr14 = ta.atr(14)
length = 20
touchThreshold = 0.01 // Percentage threshold for a touch
consolidationBars = 5 // Number of bars for the consolidation
// Conditions for build-up of pressure in the trend
emaOrder = ema8 > ema21 and ema21 > ema50
impulseMove = ta.highest(high, 14) - ta.lowest(low, 14) > 6 * atr14
// Calculate the highest high and the lowest low over the length
highestHigh = ta.highest(high, length)
lowestLow = ta.lowest(low, length)
// Calculate the number of touches of the highest high and the lowest low
upperTouches = sum((high - highestHigh) / highestHigh < touchThreshold and (high - highestHigh) /
highestHigh > -touchThreshold ? 1 : 0, length)
lowerTouches = sum((low - lowestLow) / lowestLow < touchThreshold and (low - lowestLow) /
lowestLow > -touchThreshold ? 1 : 0, length)
// Check if there is a consolidation
consolidation = upperTouches >= consolidationBars and lowerTouches >= consolidationBars
// Conditions for trader trap
breakoutCandle = ta.lowest(low, 5) > ema21 and close[1] < ema21 and close > ema21
// Check for a breakout
breakout = (high > highestHigh or low < lowestLow) and consolidation[1]
// Plotting
plotshape(series=emaOrder and impulseMove, title="Pressure Build-up",
location=location.belowbar, color=color.green, style=shape.labelup)
plotshape(series=breakoutCandle, title="Breakout Candle", location=location.belowbar,
color=color.red, style=shape.labelup)
plotshape(series=consolidation, title="Consolidation", location=location.belowbar, color=color.blue,
style=shape.labelup)
plotshape(series=breakout, title="Breakout", location=location.belowbar, color=color.red,
style=shape.labelup)