Skip to main content

Learn More About Trading Breakouts

Breakouts are a common phenomenon in the Forex market and occur across different chart intervals. It is therefore no surprise that break out trading strategies have become one of the most popular ways of trading Forex, besides other strategies such as trend following methods.

What is Breakout in Forex?

A breakout is a price movement of a security through an identified level of resistance, which is usually followed by heavy volume and an increased amount of volatility. Traders buy the underlying asset when the price breaks above a level of resistance or when it breaks below a level of support.
breakouts in forex - Equidious Research
A breakout is the point at which the market price breaks away, or moves out of a trading range. The trading range can be for any length of time but once prices exceeds the high or low of the range, a breakout has occurred. The accepted market wisdom is “buy low sell high”.

What is False Breakout in Forex?

A false breakout is when price temporarily moves above or below a key support or resistance level, but then later retreats back to the same side as it started. This is the worst case scenario for a breakout trader that enters in a trade as soon as price breaks.

How to Avoid a False Breakout.

The solution to this problem is actually pretty simple (as depicted above). Rather than act on a trade in real time as soon as price breaks a key level, we should wait until the candle closes to confirm the breakout’s strength. So the idea of setting entry orders above or below a support or resistance levels to automatically get us into a breakout trade is not a very good one. Entry orders allow us to get “wicked” into breakout trades that never actually materialize.
On the surface, this would lead us to believe that the only way to effectively trade breakouts, is to be at our trading terminals ready to act as soon as the candle closes in breakout territory. Once the candle closes, we can then open our position that hopefully has a higher chance of success. 
Strategies that are likely to provide traders with more success involve being patient and waiting for the breakout to happen, then trading the trend if it occurs, or waiting for a correction and seeing if the price resumes the breakout direction. With a good defined risk/reward ratio is most cases, break outs can become easy to trade with enough practice and understanding of various aspects such as trend lines, channels, support and resistance.
Join 300,000+ traders who stay ahead of the market, submit your details with us by filling our CONTACT FORM.
For the Best Forex Signal| Accurate Stock Signal| Profitable Comex Signals, Try Equidious Research Services. We have a team of best and well experienced Research Analysts.
Trading is an art of making handsome amount.
Enjoy Trading!
Labels:

Comments

Post a Comment

Popular posts from this blog

What is Bullish and Bearish Market?

Trading has a language of its own, and if you are starting out long or short,  bullish and bearish  are trading terms you will hear frequently. Bullish and Bearish are simply terms used to characterize trends in the currency, commodity or stock markets. The terms bullish and bearish are often used to describe the conditions in the market or the  sentiment of investors .  They are very important terms and are used in nearly all types of trading, from  currencies  to stocks.  Traders can take advantage of both  bullish and bearish markets  if they have sufficient knowledge of the market conditions that are associated with these cycles.  When traders understand the meaning of bearish and bullish and are able to identify the cycles, they will know how to profit off of any market condition. What is the difference between Bullish and Bearish Market? Bearish and  Bullish  are simply terms used to characterize trend...
Post a Comment
Read more

Do you have "FOMO Traders" Characters?

FOMO is Fear of Missing Out type of traders, which influences our daily trading habits and decision making capability in Forex Trading. There are following causes which leads FOMO Traders: High Expectations FOMO Traders thanks that one needs to double the account by next month and you are missing out if you do not make a lot of money as soon as possible. This leads to higher risk and large position sizes. One wrong trade and you will regret of choosing wrong position sizing and trade. Over Confidence When you come from a winning streak and feel invincible and then take random trades or too large positions because you think we can “feel” what the market is going to do. Lack of Confidence After a few losing trades, many traders will try to play catch up and then enter random trades just to get into the market and hopefully somehow generate a profit. No Rules When you do not have a system or rules, to begin with, then FOMO is your default mode, always jumping in a...
Post a Comment
Read more

TOP 7 MISTAKES IN FOREX TRADING

NO TRADING PLANS: A trading plan is a strict set of rules, half of which a trader draws from their trading strategy and the other one from their money management strategy. The plan may be then complemented by as many more points as the trader sees fit. WHAT IS TRADING PLAN: Specific market conditions for entering a trade; The amount of money to risk in a trade; Specific market conditions to get out if you are wrong (stop-loss); Specific market conditions to get out if you are right (take-profit); Approximate time for the market to reach your target; Note down and record everything! Write this list down as postulates and have it front of you before, after, and during your trading. RISKING TOO MUCH ON ONE TRADE: Never take too much risk in one trade. Forex brokers are allowed a lot of freedom in terms of leveraging their trading account, while beginner Traders lag behind in money management discipline. A combination of these two leads to high risk, hazard trading. Always...
Post a Comment
Read more