How To Trade Breakouts Strategy for beginners Forex trading

raders slant specs here from your trading coach calm this video is a follow-up to the support and resistance articles that was sent out via the newsletter at your trading coach calm or received a few emails from readers who observed that the support and resistance articles didn’t address breakouts, so they wanted to know do I actually trade breakouts and if, so how do I trade them while they’re observation is correct those articles focus primarily on tests of support or resistance that held they did not address breakouts, so we’ll look at that briefly today first though, if you missed the article series you can see them on my website just come over to the left-hand main menu and click on articles on the next screen click technical analysis and that should bring you to this page here which lists all the technical analysis articles on the first of a couple of pages and you’ll find their support and resistance articles one through to four, so check them out I hope you enjoy them the feedback, so far has been excellent, but, let’s get back to the questions do we trade breakouts and if, so how do I trade them well the answer is that no I don’t trade breakouts at least not in the way that the majority advice breakouts should be taken, so why is that one of the fundamental principles of my trading methodology is to find low risk high probability setups the standard method of trading a breakout does not provide for low risk and it does not provide for a high probability setup, let’s look at an example to see what I mean we have here, for example, an area of resistance price comes up to that area of resistance and pauses and the channels down below now most people will suggest that when price finally breaks through this area here do we enter here in this vicinity of the breakout with a stop-loss down here somewhere just below the low of the area of congestion for me this is not low risk the distance for the entry here down to the stop-loss here is just too great yes I know you can reduce that position size accordingly to get the same dollar or percentage of equity risk, but that’s just not my style and for me this is not high probability either, in this situation in its exact trade there may be sufficient order flow in this area here to propel the price skywards and to make this trade a winner that’s great, but the statistics show a significant number of breakouts fail and will turn around track them back down that way and stopping you out for a loss, so it doesn’t matter, if it’s a breakout of an area of congestion as we just saw here or something else, for example, a symmetrical triangle pattern entering here stop-loss down here regardless of the pattern forming the breakout in my opinion it’s just not low risk or high probability now that doesn’t mean you shouldn’t trade breakouts, if it’s something you really relate to many traders trade breakouts and do very well typically, because the profits they make when they do win are proportionately much larger than the losses, so you’ll see here the average win much greater than the average loss, that’s all well and good, but it does come at the cost of a lower winning percentage and that’s the part that just doesn’t work for me it may work for you, so how do I trade these areas well the support resistance article series handled the case where support and resistance held, so, for example, resistance again to stick with the same example price comes up test that resistance area and falls and we’re only two trades short anywhere as close as we can to that support and resistance area with the stop-loss nice and tight just up above here, but what about when it breaks when this area doesn’t hold how do i trade that well I’m simply looking for price action to offer me a low risk high probability setup just after the breakout, so anywhere in this area here or in some cases even before it breaks out down around here yes you can get in before the breakout traders, let’s see what I mean after the breakout I’m simply looking for the first retracement which offers a low-risk high probability entry with the stop-loss tied up below the low of the retraced Monroes, so, let’s have a look at that example stick with the same example resistance here price comes up to the resistance area, maybe a couple of tests before finally breaking out as I said I’m simply looking for the first retracement which offers a low risk high probability entry in this area, so it may be this retracement here which allowed me an entry roundabout there with the stop-loss just below the loads here or it may be the second retracement which is even better where the lows comes down to coincide with the previous high bring an entry around here with a stop loss down there even better is when the initial retracement comes all the way back to the point a breakout offering an entry in this area here stop-loss just down below, if you’ve read through the support and resistance articles you’ll understand the supply and demand dynamics that are taking place in this area and why provides both a low risk and high probability setup a common complaint from novice traders is what, if I miss the entry what, if, for example, price does come up here causes it resistance and breaks out and does not provide that retracement well tough you miss once, so what your job now is to simply look for the next low risk high probability setup, if it didn’t come here then it’ll come sometime later, so hang in there there’s always more trades, but how do we enter before the breakout it all comes to at a price action analysis being able to determine probable future price action from changes in momentum and volatility this comes with experience, but, let’s look at a simple example once again resistance price coming up to the area of resistance before a breakout long in this example here it shows increasing momentum on the up swings there and there weakening momentum on the down swings at a really great example here, because we always also have higher lows, so we have a low point here high or low here and high or low here, so this is a great textbook example in this case I’ll be looking to enter long for one of the weak retracements, so perhaps tried here with the stop-loss just down below and perhaps tried here again enter along with the stop-loss just down below now I always manage these trades aggressively, if the breakout doesn’t come I’m looking to get out of there with a small profit or breakeven, so always look to ensure that I have at least a one to one risk reward ratio, so the area here from the entry to the resistance is is greater in this example then down to the stop and just slightly larger here in this example here always look to have at least one to one, so that, if the breaker doesn’t come, I’m not taking a loss on out either breakeven or with a small profit, so that’s how I trade the breakouts trying to enter short somewhere up here, for example, on this one prior to the breakout beating those breaking out traders or, if I missed the entry then I’m looking for the first low risk high probability setup somewhere down in this area here now not too many opportunities in this trade and perhaps I missed it that’s fine sometimes you do miss them other times you get better entries either way it’s good, because it works well with my trading psychology and my need for a lower risk and higher probability trades I hope that gives you some ideas for your own trading I’m Lance pegs from your trading coach comm wishing you many profitable breakouts.

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