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01-03-2012, 10:10 AM #1
With breakout trades, the goal is to enter the market right when the price makes a breakout and then continue to ride the trade until volatility dies down.
Breakouts are significant because they indicate a change in the supply and demand of the currency pair you are trading.
You'll notice that unlike trading stocks or futures, there is no way for you to see the volume of trades made in the forex. Because of this, we need to rely on volatility.
Volatility measures the overall price fluctuations over a certain time and this information can be used to detect potential breakouts.
There are a few indicators that can help you gauge a pair's current volatility. Using these indicators can help you tremendously when looking for breakout opportunities.
- Moving Averages
- Bollinger Bands
- Average True Range (ATR)
There are two types of breakouts:
To spot breakouts, you can look at:
- Chart Patterns
- Trend lines
You can measure the strength of a breakout using the following:
- Moving Average Convergence/Divergence (MACD)
Finally, breakouts usually work best and FOR REAL with some kind of economic event or news catalyst. Always be sure to check the forex calendar and news before figuring out whether or not a breakout trade is the right play for the situation.
02-20-2012, 03:25 PM #2
I do agree. But in this case you need to have patience because you need to have an environment that is in the right moment before you jump in. Its not advisable to spend your time trading if you are hoping to do this. Because I'm sure you will get many false trade and you end up having multiple loses just for the pursuant of the one big profit.
03-11-2012, 03:05 PM #3
Breakouts are one of my favorite trading strategies and my choice of tools are trend lines or channels and Bollinger Bands. I usually prefer to take a position only after a breakout is tested again after the initial breakout or test!
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