How Do I Trade Breakouts in Forex?

Trading breakouts could be like gambling with your money if you are not knowledgeable with the data i.e. the fundamentals. However, if you really would love to trade breakouts and be able to generate over a 100 pips within a short time, then you have to know more about the fundamentals of Forex trading as well as the technical indicators.

The two major news events that trigger breakouts are:

1.) Interest rate decision.
2.) The non-farm payroll from the united states.

One thing you need to know about breakouts is this; before such news is released, the market looks usually quiet but tends to move in favor of the erring currency in the pair and if it's the base currency, the currency pair usually moves higher than usual before the breakout. The same happens if the erring currency is the counter, this time in the opposite direction. You should also notice a squeeze in the Bollinger as if tightening up, and in the process of releasing something. I use the 62 band Bollinger.

I should tell you this about breakouts though, the currency pair usually tends to test its last resistance or support point before it finally makes a strong rally upwards or downwards.

Now how do I prosper from this?

I know there are lists of forex calendars used in confirming economic news events. I use the fxstreet, forexfactory and dailyfx to mention but a few. I love the forexfactory however, because you can configure the exact time of news event to your computer time in your country.

When the news comes out do not be in such a rush to enter the trade but check with your forex calendar. In the case where such news was bearish for the currency pair say GBP/USD, which means favorably for the dollar, find out where the currency pair is and then place your pending order say thirty to fifty (30-50) below the price without a stop loss because the currency pair will always hit you out on your stop loss because of the spike and still continue with its new found trend.

Remember, when trend forms, it stays that way for a while and you could actually profit ensuring you take your trades in line with the trend.

Do not be discouraged however, when you did not get what you actually planned to get out of the market. Remember, there are other opportunities.

Lest I forget, ensure you place your profit point on your pending trade. The least I suggest should be about seventy (70) pips.

I'm just a startup guy with quite a load of experience and still counting. Experience they say is usually the best teacher, however, I will be glad to learn from all your great resources for knowledge on its own has no barrier and no end for he who must continually progress. http://forexpavillion.googlepages.com.

Article Source: http://EzineArticles.com/expert/Ogbonnaya_Eme/99729

adhy 11:39:00 AM