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XYZ Breakout Strategy

The XYZ-Breakout trading strategy is one of the easiest trading methods when you prefer trading breakouts. The 1-2-3 method is basically a measured move trading set up where future price is projected based on past retracements. It is also referred to as the “X-Y-Z” pattern. This strategy is pure price action and therefore no indicators are needed. It is a good possibility for beginners to learn to understand trading with support/resistance and breakout.

XYZ Breakout Strategy Rules

Long Set up:
  • In an uptrend “X” marks the beginning of an uptrend that is usually strong
  • The “Y” marks a resistance level that shows the start of a retracement. The retracement is usually limited to 38.2% – 50% Fib level
  • The retracement ends at point “Z”
  • You buy at the break of point “Y” with a 1:1 risk reward ratio with a stop loss that is placed just below the point “Z”

Short Set up:
  • In a downtrend “X” marks the beginning of a downtrend that is strong
  • The “Y” point marks a support level which starts a retracement. The retracement is limited to between 38.2% – and 50% Fib level
  • The retracement ends at point “Z”
  • You sell at the break of “Y” with stops just below “Z” and a total risk reward of 1:1

Strategy Examples

​Long Set Up
  • Point XY marks the strong uptrend before the retracement
  • Z marks the end of the retracement
  • A long position is taken at Y with a 1:1 Risk reward
  • Stops are placed a few pips below “Z” with the trade resulting in profit

​Short Set up
  • Point XY marks the strong down trend with Z showing the end of the retracement
  • A short position is taken at the break of “Y” with a 1:1 Risk reward ratio
  • Stops are placed just above “Z” with the trade resulting in profit

Conclusion
The XYZ or 123 trading strategy is a relatively simple price action based breakout Trading strategy. It works on the concept of measured moves and is a good way for beginners to learn to understand trading with support/resistance and break out.
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