The method is trading breakouts to new chart highs or lows. The reason it works and will continue to do so, is because it's based on this fact which you can observe on any Forex chart:
Most major trends start and continue from new market highs or lows.
Look at a chart and you will see this and trends that last for weeks, months or years, get in and hold them and you can make huge profits.
Breakout trading, enables you to get on board these trends and ride them, most traders however cannot do this despite the fact it works - why?
Why Most Traders Don't Trade Breakouts
Because when a break occurs, they want to wait for the dip and this is due with traders think they pinpoint timing is the way to make money but with breakout trading you miss the start but as you cannot predict prices this trading the reality is the way to go.
Breakouts if there good ones simply do not come back and the trader who waits will wait in vain.
So what should a breakout system consist of?
You need to get Forex education in 3 main areas and they are the following
1. Choosing the Best Breakouts
Not all breakouts of course go right so to get the odds on your side look for levels that have been tested numerous times - the minimum is 2 times but the more the times the better. The more times a level is tested before it breaks the better the odds of success tend to be.
2. Confirming Breakouts
You then need to confirm the breakout. A good one will feature acceleration in momentum and for this you need some momentum oscillators to help you. We have discussed these in other articles.
One or two are all you need to confirm the break and if they support it, its time to execute your trading signal.
3. Stops and Money Management
Stops are under the break.
The real key with trading big breakouts is to have your stop behind random volatility.
These big breakouts can last a long time so you need to give a bit back at the end when the trend finally turns. You cannot buy or sell market highs or lows exactly and your aim is to make money by catching a major chunk of the trend and you can do this and make a lot of money.
A method that NEVER Goes out of date
As long as markets trend, breakout trading will work and make money and even better most traders can't do it
It's a very simple Forex trading system but it's also very effective, easy to understand and time efficient. Once you have learned the basics you can be making money in around 30 minutes a day and be on the way to making big profits by trading breakouts.
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