Successful Forex Breakout Trading
For sure, forex breakout trading is definitely based on one well-known phenomenon in those markets which actually periods of quite low volatility and also followed by some periods of quite high volatility. Besides, quite often, during some quiet periods, the actual price action is going to trade in a quite narrow range and then suddenly breakouts of that price range with a fast expansion to the downside and upside as well. Of course, forex breakout trading can certainly be quite profitable if you really get it right, because all price movements are so forceful and also rapid that it can clearly move one hundred pips and even two hundred pips in even less than one hour.
But at the moment we will talk about different challenges of forex breakout trading. In fact, as with any other trading strategy, breakout trading definitely has its own challenges for all beginning foreign currency traders. And so the biggest challenge with this kind of trading is to get the right direction and timing of the trade. Thus getting the right and proper entry price and the correct exit price is easy and simple, because there is a very big move that is involved. Besides, a two or three pips difference entering the trade is certainly nothing compared to that big pip profit at stake.
Without any doubt, timing the trade is quite hard and also difficult, because getting in very early actually means that you may possibly not get the range limits properly. Moreover, getting in very late certainly means missing the breakout altogether. So many breakout traders definitely tend to get in very early, but just end up getting really caught in some false breakouts, because they were not so patient to wait for the range to establish totally.
Well, there is one more huge challenge about forex breakout trading: to get the right and proper direction of the trade. For sure, many breakout forex traders actually are not aware how exactly to do that effectually. And thus they certainly attempt to hedge all their bets by just putting limit orders in at both sides of this range. Of course, that does not work quite well in practice, because prices really have an exact tendency to test ranges, but still very close within the range. And this potentially causes even much more losses because of whipsaw trades and also false breakouts.
And finally, let’s mention successful forex breakout trading. Without any doubt, successful breakout trading systems actually have several certain things in common. First and foremost, they do not attempt to trade each range setup. In addition, each range is certainly followed by some breakout. Thus to be truly successful forex trader you need to know that.