A Breakout Trading Forex Strategy

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Published: 04th November 2010
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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.

The trick in breakout trading lies in filtering out the false breakout from a true breakout. If you can somehow master how to filter a false breakout from a true breakout, you can avoid burning your fingers by trading these false breakouts. What you need is to develop a false breakout filtering system that can help you screen out a false breakout from a true breakout.

Here is one false breakout filtering forex strategy that you can master and trade highly 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.

Now, this type of a trade setup usually tends to have a very high success rate as most of the weak players in the market get flushed out by the false breakout leaving only the strong players. These strong real money players quickly reenter the market and push it further higher.

These are the rules for playing this false breakout filtering forex strategy. Look for a currency pair that is making a 20 day high. Once, you have spotted such a pair, look if it makes 2 day low in the next three days. If it does make a 2 day low in the next three days and after making that within the next three days trades above the 20 day high, enter into a long trade. Place the stop loss a few pips below the 2 day low. Use a trailing stop to take as much profit as possible.

Similarly, in case you find a currency pair making a 20 day low, look for it to reverse and make a 2 day high in the next three days. Enter into a short trade if you find this pair trading below the 20 day low in the next three days. Place the stop loss a few pips above the 2 day high that you have previously identified. Protect your profits by using a trailing stop. Good Luck!


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Mr. Ahmad Hassam has done Masters from Harvard University. Get this highly profitable Magic Breakout Forex Strategy by Tim Trush and Julie Lavrin FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide!

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