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Forex Magic Breakout Trading Strategy

Authors: Tim Trush & Julie Lavrin | 0 Comments
Forex Magic Breakout Trading Strategy

Forex Magic Breakout Trading Strategy based on price breakout movement. And what is a “breakout” in forex market? A breakout occurs when the price breaks a significant high and makes a new high. This is the definition. Another breakout occurs when the price breaks a significant low and makes a new low. It looks simple. Most traders are trying to catch these breakouts and to make money on the accelerated price move.

A so-called momentum trader places his buy-stop order just above the significant high. He is waiting for this high breakout. If the breakout didn’t happen, he cancels his buy-stop order and prepares for the next trade. If the breakout happens and his buy-stop target is filled, his trading platform automatically opens a long position.The same holds for a low breakout. Why traders are doing that? Because the price action typically accelerates after a breakout and results in a nice profit. But it’s not so sweet every time. There is a risk of significant loss.

The nightmares of momentum traders are “false breakouts” and they often happen. We have tested some breakout systems on all major currency pairs ten years back. Most of the breakouts were false breakouts or resulted in a small profit. Any system that relies purely on breakouts does not work consistently. Since we, Tim and Julie, are in the financial markets for more than ten years, we have collected some sort of information the large banks and corporations do not want you to know.


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Tags:
breakout, traders

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