If you are a novice forex trader, or simply a trader who wants to make bigger gains, then the enclosed methodology, if incorporated into your forex trading system, will help you make huge gains consistently - lets look at it.
Many forex traders make the mistake of trying to predict where forex prices may go - but that really is hoping or guessing and you wont be rewarded for it in forex trading. Others try to buy low and sell high - but this well worn wisdom is the same, it involves prediction and is destined to lose.
So what methodology should you base your forex trading system on?
Consider this fact:
Most major trends develop from new market lows or highs and accelerate away from the breakout point. So if you learn to sell these lows and buy these highs when there broken, you can be in on all the big trends - most traders cannot do this though.
Why?
Because they want to wait for the pullback and get in at a better price ( i.e. buy low sell high mentality) but they wait in vain as the trend sails across the horizon and their not in. If you learn how to buy and sell breakouts you can make a lot of money but how do you know if a breakout will continue, of course not all do so, how do get the ones with high odds of success?
For this we need to keep two key points in mind:
1. The more times support or resistance has been tested the more valid it is and if its in different time frames, spaced apart by weeks or months all the better. This means the level is considered valid by the market and the chances are when the level breaks, a new strong trend will develop.
2. With breakout trading there is no prediction, you are acting on the reality of price change and that means no hoping or guessing is involved. You do however need to look at price momentum to confirm the move is valid.
Price momentum should pick up, as the breakout point gives way and for this you need to look at momentum oscillators ( we don't have time to discuss them here simply look up our other articles ) but they will confirm the velocity of price is strengthening and if it is, you execute your trading signal.
Once in the breakout trade, the stop loss level is obvious - behind the breakout point. This method may seem simple and it is - but most of the world's top traders use it and you should to. It's a simple, logical method that's easy to understand and its obvious why it works.
All you need to do is spot valid set ups on a forex chart and then use a few momentum oscillators to confirm the move - that's it.
The one final point to keep in mind is
When using breakouts is to be patient and look for ones that all traders consider valid and these will be high odds breaks, so be patient. I know a trader who does this, trades about 10 times a year and piled up over 300% last year alone. He's not a genius, guru or smart ass; he's simply using a methodology that works for anyone and it can work for you to.
