Timing for breakouts – a profitable forex trading strategy

Many traders are out there searching for the best trading strategy that can successfully give them gains on a daily base. There are several forex trading strategies available and most of them have worked and some have not been successful at all.

 forex trading is very risky and risk management is of paramount importance due to the fact that you are trading with anticipation of gains. In this section we will look at how timing for break outs can be an effective strategy when trading in forex. Many traders will agree with me that timing for breakouts play a pivotal role in the forex trading and it is one of the strategies that can enhance your system to be more profitable and in turn create positive results. 

 Timing for breakouts is very important and this is the time you will get to observe a trade whether it is very volatile or not. The breakouts can be observed by analysis the candlestick charts as from midnight to 4:00 am EST. By observing the 4 hourly candles you will be able to see a significant breakout of the currency pair and determine what kind of action to take. 

 Usually, the breakout of a trade often occurs early morning and the favorite pairs to trade with would be the USD/GBP, USD/EUR and also to include other major pairs. 

 The methodology behind breakout trading is that at times the price will consolidate around a certain level and will remain in a tight range. Now obviously the price will not remain in this narrow range forever so when it finally breaks out of this range, it is likely that a strong breakout will occur. 

 This isn't always the case but the longer time frame you use to trade the markets, the greater the chance that a meaningful breakout will take place. This is because there will be lots of traders and financial institutions all around the world who will have noticed that the price is trading in a narrow range and who will also be waiting to enter a position as soon as the price breaks out. 

 After observing the 4 candles you can then base your decision with other factors such as the hourly news feeds and technical analysis of the currency pairs. Fundamental analysis also plays a roles in your timing for breakouts but this can not only be achieved in a day but it can give you slight information that will help you on making your decision. 

 The trick here is to enter the trade as soon as you possibly can after the breakout occurs. If you wait too long, you could miss the major move and actually enter too late, possibly even so late that the trade reverses for a loss. If you enter the trade and set a reasonable stop profit, you will minimize your loss potential while setting yourself up to collect the big pip movements that are often associated with currency pair breakouts. 

 Timing is very essential when setting up your trading system and some trading systems that require timing do not make use of technical indicators. Generally, if a break out has been observed you then have to open your positions and hold on until 1:00 pm EST and then continue to trade the following day (a protective stop loss has to be made). 

 When you catch a true breakout, however, you could very well gain hundreds and maybe even 2 hundred pips. When this happens you can set a trailing stop and let the trade continue to run at no risk with your profits "locked in." 

 However, catching the trend on a true breakout is worth losing some pips on all the false breaks the trader has to take when using this strategy. Hundreds of pips can be gained when a trader enters a trade at the beginning of a true breakout. So by setting your stops correctly, you should not lose too many pips on false breaks, and you may even be able to grab a small profit even on a false breakout. 

 For the professional traders, after observing a breakout you would have to open your positions and set up target profits and a protective stop loss. Actually a protective stop lose has to be placed when ever you open a position. You can set your profit targets to be at 80 pips and if it hits then this would be great. Daily profits of 90 pips - spread would definitely be satisfactory and this would definitely mean that your trading strategy is well effective. 

 To some traders, timing can be very stressful indeed due to the fact that you would have to wake up early morning and set up your system but in the long run it is worth the effort. Monitoring of your trade every hour will definitely lower your risks and increase your rewards. Certainly your risk to reward ratio will become satisfactory. 

 Your timing for breakouts can also be enhanced by making use of other forex trading tools such as the Fibonacci ratios and other charting tools. As a trader if you were only making use of the trading tools without basing on time factor then you would have to try the timing factor and see if it works. At most cases, breakouts can be observed early morning and this is the right time to take action whilst other traders would not have seen it. By the time they start to observe the breakout in the morning you would have already been making profits due to the fact that you entered the trade early morning when you had observed the significant breakout. 

 This strategy works in connection with all forex trading strategy and it has been proved and tested and the results are splendid. Trading is very simple only if the right procedures are followed and closely monitored. 

 Having a good trading strategy does not mean that you should be over confident when trading. Basing your trading system with related strategies such as timing, trading news, Fibonacci analysis, determining your stop loss and risk management will help your trading system to be solid.