If you look at a chart of any currency pair you will see big trends which last for weeks on end and these trends can give you fantastic profits if you know how to get into them. The good news is the big trends all start and continue in the same manner – They break overhead resistance and then, move higher and this is called a breakout. If you trade breakouts, you will have a simple and powerful method which simply follows price action and gets you in on all the big trends.
Of course, not every break of resistance, will see a new trend develop and many will fail to follow through. To make profits, you need to know which breaks offer you the best odds – before you enter your trading signal.
The best breaks are ones which occur after a level has been tested a few times and becomes significant to other traders. If a level has been tested a few times, traders will want to short into resistance and have their stop behind it. The more times the level is tested, the more stops are clustered just behind resistance. When the break does occur, these stops are triggered and push the price away from the breakout point then, new technical buying comes which pushes the price further away from the breakout point and a new trend is born.
In terms of numbers of tests before the break, I like about 4 – 6 and ideally, want 2 of those testes to be at least a month apart. The break when it comes is even better, if most people think the currency should be going the other way. The reason these breaks are better is simple – the vast majority of traders always lose money and there are likely to be a lot of stops to be hit as the resistance gives way and takes these losers out of the market.
The simple method above, will make you money and not only will it get you in on all the big trends, allow you to trade just a few times a week and make triple digit gains. If you want to achieve currency trading success, there is no better method than breakout trading.