Profitable Forex Breakout Strategy
Breakout trading can be highly profitable yet at the same time frustrating as many breakouts have a tendency to fail. The main cause behind most of these false breakouts in the forex market is the big players that intentionally cause pairs to breakout in order to suck in non suspecting or inexperienced players.
Breakout trading is all about learning how to avoid trading a false breakout. You need to develop a price filter that can help you screen a false breakout from a true breakout so that you can trade it.
Here is one false breakout filtering forex strategy that you can master and trade profitably. This false breakout filtering forex strategy revolves around taking advantage of a strong trend in the market that is making higher highs or lowers lows. Suddenly it makes a low or high, fail, then reverse and start making highs or lows again as the case maybe.
This is a high probability trade setup as by making a sudden high or low, inexperienced players were sucked into the market and flushed out by this false breakout. This leaves only the strong real money players in the market. Inexperienced players had tried to trade the false breakout and were out of the market soon as it their stops were hit.
How to identify such a high probability trade setup? Look for a currency pair making a 20 day high. Look for it to make a 2 day low in the next 3 days. If it does make a 2 day low in the next 3 days, look for it to trade above the 20 day high in the next 3 days after making the 2 day low. If it does, enter into a long trade by placing a stop loss a few pips below the 2 day low and protect your profits by using a trailing stop.
In the case of a downtrend, look for a currency pair making a 20 day low. Once it does, look for it to make a 2 day high in the next 3 days. Once, it makes the 2 days high, if it trades below the 20 day low, enter into a short trade with the stop loss a few pips above the 2 day high. Use a trailing stop to stay in the trend as long as possible and make as much pips as you can! Good Luck!
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get this highly profitable Magic Breakout Forex Strategy by Tim Trush and Julie Lavrin FREE. Get these Correlation Trading Cheatsheets FREE.
by: Ahmad Hassam
Total views: 31
Word Count: 394
Date: Wed, 3 Nov 2010
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