The Way to Trade FOREX
Billions of dollars are won and lost each day in the forex markets as speculators trade currencies, hoping to make their fortunes. Many of these traders don't have a method or don't know the way to trade forex markets profitably, and they end up suffering a string of losses. Breakout trading is a proven method that can help you succeed at forex trading.
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Instructions
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Forex Breakout Trading
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The price chart is your road map to the trend's direction. Go to your computer and pull up a free charting service (see Resources section). List all the forex currency pairs in the left hand symbol column. This will link all the symbols to your chart so that as you scroll down the symbols list, it will pull up the price action on the chart that's to the right of the symbol column.
At the bottom of the screen, press the "6 month" tab to reveal six months of price history on the chart
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Look for periods of price contraction within a forex currency pair. Scroll down the list of forex currency pair symbols and look for periods of contraction within the price action on the corresponding chart. You can identify price contraction on the price chart by identifying both the upper and lower price points at which price is trading back and forth. Make note of any forex pairs that are in a contracting price range.
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Breakout trades are explosive because they have a lot of trading momentum. Watch each currency pair for signs of forceful momentum that cause price to trade through any of the identified price points. You will then enter the move just as it emerges out of its trading range and ride the move upwards for a quick gain. Breakout trading is very explosive because it takes a lot of trading force, or energy, to cause it break out of the range, so momentum is very high.
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Tips & Warnings
Add the "trading volume" from the indicator tab on the screen to help you time the breakout move. Greater trading volume will be reflected in this indicator on the day of the breakout and will help you judge the force behind the move. This will assist you in avoiding false breakout moves in which price tries to emerge from the trading range but lacks the volume to follow through.
Always use stop-price orders in trading. You put in a order to sell if going long, or cover if shorting the forex, so that if the trade fails you will avoid a huge loss. Stop-price orders are a form of insurance that get you out of losing trade with a small loss, compared a huge loss by not having them.
References
Resources
- Photo Credit Currencies image by Clark Duffy from Fotolia.com money growth image by max blain from Fotolia.com stock graph drawing image by .shock from Fotolia.com chart background image by Stasys Eidiejus from Fotolia.com
