Many traders think the route to forex trading success is to buy a forex robot from a vendor but most have never been traded and have simulated track records in hindsight so why not build your own? Here is a framework for one which can make triple digit annual gains and its simple…
The first point to make is if you like action and want to trade all the time don’t read on – this is all about trading very high odds trades for huge profits not trading for fun or messing about for a few pips.
Right here is the system blueprint.
First were going to base it on breakout methodology which works and will continue to work. If you don’t know what it is – it’s simply buying breakouts above new highs or lows on your forex charts.
Most traders hate breakouts.
They think they have missed a bit of the move and want a pullback to get in at a better price. Of course good breakouts don’t pullback, they sail over the horizon and the trader is left thinking what might have been.
Fact MOST Major trends start from breakouts of new highs or lows – so go with them and leave buying dips and predicting forex moves to the losing majority.
Breakouts mean you trade the REALITY of price change and trade the truth as it is on the charts.
OK now, not all breakouts are created equal and you want the ones where the odds are highest. You’re looking for support and resistance which traders find important and you can often see these levels in the news.
If traders don’t expect levels to break or the fundamentals point the other way, it’s probably a good one!
Generally, it’s the trades that are uncomfortable to do, that prove the most profitable.
The more tests, the wider these tests are spaced apart and the more time frames they occur in, the more valid the breakout is likely to be
Generally good breakout trades only occur a few times a year in each currency but if you milk them you can make triple digit profits.
TIP: Don’t just look on the daily chart – use the weekly chart to and see if the support and resistance lines up on these.
Most traders never look at the weekly chart – but they give an extra dimension to your forex trading analysis, so use them.
Let’s assume you see a break…
You want to enter it but you need to do one more thing – check momentum is in favour before executing your trading signal. We don’t have time to discuss momentum oscillators in detail here, just look up our other articles – but two great ones are the RSI and stochastic.
If momentum supports your view enter your trading signal and place your stop below the breakout point.
If the break is valid, it will accelerate away from the breakout point quickly.
Now – if this is a good break, don’t trail your stop up to soon!
Wait and trail your stop way behind normal volatility.
How many times do traders get direction of the forex trend right and then get stopped out early, only to see the trade pile up $10,000 or more?
A lot – so don’t make this mistake, if you are trading big breaks, you want big profits, so trail slowly and be prepared to give a bit back at the end.
If you caught just 50% of every major trend, you would be very rich; accept short term dips against you and keep your eyes on the bigger long term prize.
Big breakouts can be held for weeks; months or even years so make sure you make the most of them.
Does the above sound simple?
It is so what’s the catch – Why doesn’t everyone do it?
The reason is:
It takes patience and discipline to wait for the right breakouts and then even more discipline to follow them – you need confidence and iron discipline – but you can have these if you want to and soon be piling up triple digit profits.
So make trading breakouts the basis of your forex trading system and you can enjoy currency trading success!