Forex Break Out Trading Strategy – Trading Break Outs on The Cable.

The Breakout Continuation Trading Strategy
There is not a single forex trader who has been profitable for any length of time that is not patient. Every single profitable trader knows his strategy, what their looking for in a trade setup, and simply waits for this to occur before placing a trade. Sometimes this may take hours, other times they may not even place a trade, why? It’s very simple, they know that the quality of the trade setup is critical to their success and settle for nothing less! It sounds simple, and it is, but 95% or more of all retail forex traders lack patience.
Take for example breakout trading strategies. Most rely on a tight stop to maintain a level of profitability over the course of time. Additionally many breakout trades require fast paced entries on a break of a certain pre-determined level. Knowing what we know about patience being key to the success of every profitable trader, lets apply it to the standard breakout trade.

This is what I call the Breakout Continuation Trading Strategy. It’s a common, repeatable chart pattern seen everyday in the forex market. Simply put the market likes to retest levels it moves from. For example lets say the market is trending up and sets a high. When that high is broken, more often then not the market will come back down and test the previous high as support. Many simply buy the break higher, but why? Trading breakouts the traditional way is usually chaulked with fake outs, getting slipped on your entry, or just plain missing the trade because it moved so fast. When you wait for the pullback to the level of the breakout, the market is generally moving much slower, allowing for a safe entry. Additionally when the market pulls back and holds at that level you have the added confirmation that the trade is indeed going to hold.

So lets put it all together. A great Breakout Continuation Trade Setup can be identified with 4 easy points.

1.) Identify a key previous support/resistance area that if broken would lead to a further move in that direction.

2.) Let the market break that level.

3.) Allow the market to come back and test the level it originally broke.

4.) The candle that retests the breakout area should preferably be a reversal candle (shooting star, hammer, ect)

When all 4 criteria are meet you have a good entry point. Possible points to enter once the criteria are meet are upon the close of the candle that retests the breakout, the exact point of the breakout, or above the high or below the low of the candle that is making the retest depending on the original direction of the move. For further clarification of the Breakout Continuation Trade please see the video linked below. If you would like to see this strategy and many more put to use, join us in our live forex room by taking your 10 day. See you in the room, until then happy trading!