Forex Trading Strategy – Using a Breakout System in Forex Trading Strategy

When trading currency in the Forex market, it would be stupid to do so without a coherent plan or strategy. If you do not know what you are doing, you are sure to end up losing a lot of money. The strategy that your device needs to be simple so that it can be easily executed and consistent, which means you have to give it time to work. Test your strategy by trading on a demo of how and perfect it before you risk real money.

A trading strategy that many traders swear by is breakout trading, a system that is based on resistance and support levels and use of momentum indicators. They feel that it is unrealistic to buy low and sell high and it is easier to trade breakouts to new levels of high or low. When a break happens, how can you be sure that it will be sustainable? You will use price momentum indicators such as RSI and stochastic to confirm the trend. Your stop then becomes the point just below the breakout point. Many traders wait for confirmation of pullback which does not work on big market movement, so they might miss the opportunity all together.

The other thing to remember is that when price momentum indicators support a genuine break, you are likely looking at a sustained trend so be careful in setting your stop loss. Preferably set a trailing stop that is well outside the normal spread for market volatility, so that you do not prematurely exit your position and miss the profit opportunities.

This approach indicates clearly why many traders will not like the methodology. If the momentum indicators signal a genuine break, you will often be buying high and selling low, which is the absolute opposite off the traditional trading maxim. But if you are absolutely sure about what you are doing, a contrarian approach sometimes helps. After all, the vast majority of traders lose money and if you follow them, you are also likely to do so.

Equip your self with the best automated trading software or Forex robots that you can find. You will have access to accurate market analysis, and the trading signals on which you will be relying will be accurate, consistent and reliable.

Source by Mark S. Carter

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