Forex trading for beginners isn’t easy. But with the help of the breakout strategy below, you’ll be profiting in no time!
This strategy is different than most of the conventional breakout strategies out there. Instead of simply trading the actual break of a level, we’re waiting for a pullback and retest before entering.
Another difference here is that we’re only interested in breakouts that occur from a wedge pattern rather than a horizontal level.
Here is an illustration of the Forex breakout strategy.
Notice how the market has worked itself into a terminal wedge, which simply means that the pattern must eventually come to an end. The opportunity to trade this pattern occurs when the market breaks to either side and then retests the level as new support or resistance. In the case of the illustration above, the entry would have come on a retest of support-turned-resistance.
Let’s take a look at the same breakout strategy but this time we’ll apply it to a USDJPY 4 hour chart.
Notice how in the USDJPY 4 hour chart above, the market touched the upper and lower boundaries of the wedge several times before eventually breaking lower. As soon as the 4 hour bar closed below support, we could have looked for an entry on a retest of former support, which came just a few hours later.
Although the pin bar trading strategy is my favorite, I have had some of my largest trades using the Forex breakout strategy above. The market will often react quite aggressively after the breakout occurs, allowing traders to secure a large profit in a relatively short period of time.
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