We are going to give you a simple fact here which many traders don't understand why it's so significant and never use it to their advantage.
If you do, then it could make you huge profits in online forex trading and ensure you never miss a major move again.
So here it is:
Most major trends start from new market highs NOT market lows.
Why is this so significant?
A major failure of many traders especially novice traders, is they always want to “buy low and sell high” or buy dips.
Of course, if they do this they will never catch major moves.
If most major trends start at new market highs then the way to make money is to “buy high and sell higher”
Most traders cannot do this:
They see a breakout from new market highs and think prices are now to high so they think "let’s wait for the pullback to get in".
The problem is most of the time prices don’t pullback, the trader never gets on board and sees a trade make $10,000 or more and their not in!
Breakouts are simply one of the best ways to trade and on breaks of significant support or resistance the odds of the trend continuing are good.
You can therefore get in with the odds on your side, with clearly defined stops below the breakout.
Breakouts allow you to trade on confirmation and that’s why it’s such a great way to trade.
Yes, it can be uncomfortable as you won’t be in at the bottom or sell at the top, but you can’t do that anyway and you know the odds are on your side.
How to trade breakouts.
1. Look only for significant support and resistance that has been tested several times and preferably with months in between tests.
2. Trade only if prices close above resistance. Many times prices can spike through resistance in a day session and fall back, so wait for the close of US Trading.
3. Place your stop behind the breakout point, once the break is under way.
4. Do not trail up your stop to quickly.
5. If you are worried about short term volatility, buy at the money or in the money options to give you staying power.
6. Never predict a breakout. Only act on confirmation at the end of the day and before you take a position make sure momentum indicators point to further strength – An indicator such as the stochastic is useful here.
Breakouts are simple to understand, easy to trade, offer great risk to reward and will allow you to hit the major big moves that help yield the big profits.
If you think "buy low sell high can make you money" – Chances are it won't.
However if you “buy high and sell higher” you could make some huge profits.
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