How to trade forex for beginners ?
This breakout strategy is very simple and all the beginers to forex can test this strategy and user in real account. The breakout strategy can be used on all triangle types. The execution is the same regardless of whether the triangle is ascending, descending or symmetrical.
The breakout strategy is to buy when the price of an asset moves above the upper trendline of a triangle, or short sell (sell the asset before it hits a lower price, intending to buy it back even lower) when the price of an asset drops below the lower trendline of the triangle.
Breakout refers to a market situation where prices move above resistance levels or below support levels. These breakouts are used as indicators of opportunities for traders.
Since each trader may draw their trendlines slightly differently, the exact entry point may vary between traders. To help isolate when the price is breaking out of the support or resistance levels, observing an increase in volume can help highlight when the price is starting to gain momentum towards a breakout.
The objective of the breakout strategy is to capture profit as prices move away from the trendlines forming the triangle.
If the price breaks below triangle support (lower trendline), then a short trade is initiated with a stop-loss order placed above a recent swing high, or just above triangle resistance (upper trendline).
If the price breaks above triangle resistance (upper trendline), then a long trade is initiated with a stop-loss order placed below a recent swing low, or just below triangle support (lower trendline).
It helps to have exit strategies in place when purchasing, so you can sell when it is the right time based on your criteria.
To exit a profitable trade, consider using a profit target. A profit target is an offsetting order placed at a pre-determined price. One option is to place a profit target at a price that will capture a price move equal to the entire height of the triangle. For example, if the triangle was $1 in height at its thickest point (left side), then place a profit target $1 above the breakout point if long, or $1 below the breakout point if short.
Profit targets are the simplest approach for exiting a profitable trade, since the trader does nothing once the trade is underway. Eventually, the price will reach either the stop-loss or profit target. The problem is that sometimes the trade may show a nice profit, but not reach the profit target. Traders may wish to add additional criteria to their exit plan, such as exiting a trade if the price starts trending against their position.