Here we will look at the idea of following Forex pricing action through the chart and creating a huge FX gain in a simple and proven way.
If you look at a chart of a currency pair, you will see major trends that last a few weeks, and if you know how to get into them, these trends can give you great returns. The good news is that the big trends all start and continue in the same way – they break the overhead resistance and then, move higher, and this is called a breakout. If you trade breakouts, you will have a simple and powerful method that simply follows the price action and takes you through all the major trends.
Of course, not every break in the resistance, new trends will develop and many will fail to follow it. To make a profit, you need to know which breaks give you the best adversity before entering your trading signal.
The best breaks are the ones that become significant to other traders after several levels of testing. If a level is tested a few times, traders want to go into resistance and stop them behind it. The more often the level is tested, the more stops are clustered just behind the resistance. When the break occurs, triggering these stops removes the price from the breakout point, new technological purchases come that push the price further away from the breakout point, and a new trend is born.
In judging the number of tests before the break, I like about 4 – 6, and ideally, 2 of those tests should be at least one month apart. Better still when the break comes, if most people think the coin should go the other way. The reason these breaks get better is simple – a large number of traders are always losing money and there is a possibility of reading a lot of stops as a way of preventing and taking these victims out of the market.
The above simple method will make you money and not only will it get you all the big trends, you can trade a few times a week and get triple digits. If you want to succeed in the currency business, there is no better way than breakout trading.