Here is a great example of the breakout continuation trade on the EUR/JPY. This type of forex day trading setup is a great way to trade breakouts without having to chase the initial breakout. When entering on the initial breakout, often times these are simply fake moves that lead to a complete reversal in the market. This forex trading strategy relies on the market proving that it is holding the breakout BEFORE you choose to enter! By letting the market prove that it is holding the breakout before entering the trade you increase your odds for success greatly.
On the trade below we have a great example of the breakout continuation forex trade. The market breaks below the previous major intra-day swing low, and closes below it. On the following candle (#1 blue arrow) the market comes back up and tests the level of breakout. On the following candle (#2 red arrow) the market bounces off that level of breakout proving that it is holding and additionally closes as a bearish engulfing candle. On the next candle we were looking for the market to test the resistance area again which it did, thus giving us a great entry with a great risk/reward trade setup to go short on the breakout continuation setup.
