If you want to start trading forex then if you make this method the basis of your FX Trading strategy, you will catch all the big moves and all the big profits. Let's take a look at it and how it could lead you to triple digit gains...This FX strategy is simply based upon breakouts, which is a timeless strategy for profit which works, will continue to work and is easy to understand.
What is a Breakout?
A breakout is simply a break to new high or low on a forex chart
Why is it so effective?
Almost every big move starts from a new market high or market low or a breakout on the chart. Check any forex chart and you will see this occur again and again.
Why Doesn't Everyone Trade Breakouts Then?
Most traders are looking to buy low or sell high and trying to get perfect market timing, by waiting to buy at bottom or sell at the top and wait for a pullback when a breakout occurs. They miss the moves as once a strong breakout occurs, it tends to continue. The trader who waits is left watching the price disappear over the horizon making thousands of dollars and he's not in.
Buying breakouts is not predicting, it's simply trading the reality of a price change on the chart.
Most traders find this hard, they want always to get in at a low and sell at a high which is not possible and therefore miss these moves. If they would have gone with them they would have made money.
What are the Best Breakouts?
Not all breakouts of course continue and many fail, so you really need to concentrate on the high odds ones which are valid. Generally the valid breakouts are ones which have tested the breakout point at least 3 times, in at least 2 different time frames and the wider they are apart, in terms of time the better.
It's basically the more tests, more times frames and the wider they spaced apart the better and more valid the breakout is.
You need to look for areas the market considers important and if a break occurs and most traders disagree with it, it's likely to be a good one!
The best breakouts only occur a few times in each currency per year - but these are the high odds trades and I know traders who make triple digit gains on them and you can to.
Anything Else?
Yes you should always confirm the breakout with momentum indicators. We don't have time to discuss them here (simply look up our other articles) but these are indicators that gauge the strength of price and you want them supporting any price break.
Use the stochastic and RSI as a good two to look at first. These are visual indicators, easy to use and on every major forex chart service.
What about Stops?
Simple right under the breakout point.
The key to making money though is how you trail your stop.
If it's a big break don't trail to soon wait until the trend is underway and trail outside of daily volatility.
Breakout trading may be simple but it works and most people don't like doing it, don't let that put you off the majority don't win and it works!
All the best currency trading systems are simple and it's a fact simple systems work best, as they are more robust in the face of brutal market movements. If you base your FX Strategy on trading breakouts, you can soon be enjoying currency trading success and targeting triple digit annual gains.
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