This trading strategy is pure price action and therefore no indicators are required. For those who do need help, using a Fibonacci tool can be helpful.

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XYZ Breakout Strategy Rules

Long Set up:

In an uptrend, “X” marks the start of an uptrend, which is usually strong

  • The “Y” marks a resistance level which shows the start of a retracement. The retracement is usually limited to 38.2 – 50%
  • The retracement end marks the point “Z”
  • Buy on break of point “Y” with a 1:1 risk reward ratio with stop loss placed just below the point “Z”

Short Set up:

In a downtrend, “X” marks the starts of a downtrend which is strong

  • The “Y” point marks a support level that starts a retracement. The retracement is limited to between 38.2% – and 50% Fib level
  • The retracement ends the point “Z”
  • Sell on 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 retracement
  • A long position is take at Y with a 1:1 Risk reward
  • Stops are placed a few pips below “Z” with the trade resulting in a profit

Short Set up

Point XY marks the strong down trend with Z showing the end of the re tracement

  • A short position is taken on break of “Y” with a 1:1 Risk reward ratio
  • Stops are placed just above “Z” with the trade resulting in a profit


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.