Explode Your Forex Account With BreakOut Trading System (part1)

Dear traders,

A new chapter of trading the online Forex Market is opened again for more profits as the FX market is getting more complex and interesting due to the interpretation and implementation of both technical and fundamental indicators. What I will be sharing with you is called “BREAKOUT TRADING STRATEGY” (BTS). Technically, the Breakout methods seems moderately simple but its simplicity is somehow deceptive because Breakouts are amongst some of the most powerful, most profitable players in existence but 72% of all Breakouts fail and in that it remains one of the most effective ways of trading, if used correctly.

I am sure you will ask yourself how can Breakouts be so powerful and profitable if most of them Fail?

Answer: The 28% that works do so in a major way. Big Profits! In fact, its simplicity makes it a tool that can be used by all traders from novices to seasoned traders. The logic behind Breakouts is simple to understand and easy for any trader to implement. An additional benefit of Breakouts is because the logic is so simple and traders find it easy to trade with discipline.

Now, let me quickly define Breakout so that you will have a clear idea or perspective towards the Money Generating Machine (MGM). A Breakout could be defined as the point at which the price breaks away or move out of a trading range. Moreover, the trading range could be for any length of time but once the prices exceeds the high or low level of the trading range, a Breakout has occurred.

Oh! The definition is not clear enough; Breakout is a price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support. Simple!!! But once a resistance level is broken, it is regarded as the next level of support when the asset experiences a pullback. Most traders use chart patterns and other technical tools such as trendlines to identify possible candidates that are likely to break through a support/resistance level.

Many Breakout traders find trading opportunities by identifying chart patterns such as channels, ascending triangles, descending triangles, headers and shoulders, etc. These types of traders will generally set up target prices to be equal to the distance between support and resistance levels.

Breakout trading is not a new concept because lots of traders have been using this strategy for long and many are still using it for big profits. I will strongly advise to trade Breakouts in the direction of the trend, do not trade against the trend or no trend at all. Again, the probabilities of trading along the trend are higher than trading against it and a Breakout trade will only be successful when a TRUE Breakout is determined.

“When you identify an uptrend and decide to buy, you have to decide whether to buy immediately or wait for the dip. If you buy fast, you get in gear with the trend but your stops are likely to be farther away and you risk more. If you wait for the dip, you will risk less but will have five groups of competitors:

1. Buyers who want to add to their positions
2. Sellers who want to add to their positions
3. Sellers who want to get out at even
4. Traders who never bought, and
5. Traders who sold early but are eager to buy

The waiting area for a pullback is very crowded! Markets are not known for their charity, and a deep pullback may well signal the beginning of a reversal. This reasoning also applies to downtrends. Waiting for pullbacks when a trend is gathering steam is an amateur’s game.

If you want to have the opportunity to make the really big money from the big moves, you need to get in at the start of the trend and follow the move.

An easy way of recognizing a Breakout is after price has been trending (moving in one direction, either up or down) it will move into consolidation, or 'pullback'. This normally occurs because traders with positions in the direction of the trend close them to take profits and those with positions that ended up losing will want to recover. During this time, price does what we call range, or move in a very narrow boundary between two price levels (support and resistance). And the more the market consolidates the higher the volatility.

The breakout will occur once the market has made up its mind about it direction - be it a trend continuation or a trend reversal. When that happens, either the support or resistance price level will fail and price will move out of the previous range. Note that Breakouts typically occur during active trading hours and as such price will usually move out of the range with decisiveness. A typical confirmation of a Breakout is when price breaks the previous swing high/low (recent high or low).

Trading the Breakout involves defined discipline because it is not a complex method and if you are going to trade any methodology with discipline, you must first have confidence in its ability to work. This is where the simplicity of the Breakout method of trading is, and that is the strength of the strategy. If you understand this fact, coupled with discipline, even when you are losing trades; logically you will soundly base your plans of making profits over the longer term.

Why would you trade the Breakouts?

Breakouts enable you to utilize your trading capital. Moreover, instead of buying low, trading against the trend or waiting for retracements in the Forex market, you could get the trend earlier, lock into and hold the trend with huge profits.

The fact is, however, the market spend most of it time in trading ranges going nowhere. Many markets don’t trend for several days. A trader who takes a trade in the anticipation that it will move, may have to wait a long time to see the trade move in his/her favour, if it does at all. This can tie up capital for long periods that could be utilized more productively elsewhere. The big advantage of Breakout trading is you are only entering a trend in motion. As we all know, a trend in motion is more likely to continue than reverse. This is a basic principle that Technical Analysis is based upon, and Breakouts get you in, as the trend emerges, and has a high probability of continuing. You therefore know you are only entering markets that have a high probability of trending strongly and making you big profits.

Anyway, Breakout trading has again been successful for many and not so successful for many more. Basically, the people you would probably want to hear from most would be Pivot Point traders. They trade in a similar fashion with Support and Resistance lines. Most systems based around Pivots use similar indicators as Average Directional Movement Index (ADX) or Momentum Indicators. Have you gotten my free wonderful forex e-book? If No, this gift is waiting for you and you will find it useful to your trades. Just fill your name and e-mail below the blog to receive it.

Whao! We’ve just started with this strategy and I know by the time I will be revealing the secrets of trading the Breakout strategy, you will never remain the same – cause “Your Level of trading the Forex market will change drastically” Expect more insights in the edition.

Just make it a date with with me for the next edition because it’s going to be explosive.

Keep moving forward and trade Forex profitably!!!

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Hassan Ismail,

Fx trader & coach