Trading is all about having a logical currency trading system you understand and can have confidence in. If you have confidence in your methodology, you can apply it with discipline and enjoy long term currency trading success.



If of course you don't understand a method and have confidence in it you will never be able to follow it with discipline and have no method at all.

Breakout Methodology - Why It Works

This method is easy to understand, easy to apply and can and does make big profits.

The methodology we are going to look at here is trading breakouts.

This trading involves catching breaks of important highs or lows.

Fact:

Most major moves start from new market highs and lows and this method will catch them. Most traders make the mistake of trying to buy low and sell high and when prices breakout - they wait for a pullback - but these pullbacks never come and the trader is waiting to get on board, as the trade sails away over the horizon.

If you learn to trade these breaks you can make big profits - but how do you do it?

Let's take a look.

Using Support and Resistance

You are looking for levels that are considered important by the market and you should look for at least 3 - 4 tests preferably in time frames that are wide apart.

Generally, the more times a level has been tested the more valid it is.

Confirming the Break

You can and do get false breakouts, so it's important that any breakout on a forex chart is supported by rising and strengthening momentum.

How do you do this?

You need some momentum oscillators to help you - we don't have time to discuss these in full detail here but you can simply look up our other articles.

If momentum supports the break, you have a forex trading signal you can execute.

Stop Loss

Your stop loss level is obvious - and is behind the breakout.

Why Most Traders Don't use Breakouts

Most traders find a breakout method hard to follow because they think they have missed a bit of the move and wait for the pullback - but history shows the big breaks don't come back, they carry on and the odds are in your favour.

Patience is the Key!

The key with breakout trading is only trade valid breaks of support and resistance and be patient until they come around. You don't get paid for how often you trade in currencies - you get paid for being right with your forex trading strategy and that's it.

A Simple Methodology Which Works

All the best forex trading methods are simple but don't be deceived, that doesn't mean you won't make money with breakouts - you can. Most of the top traders in the world use breakout methodology to some degree in their trading.

When you learn currency trading basics, you need a methodology to base your currency trading system on, breakouts are ideal and can lead you to long term currency trading success.