Forex Breakout Strategy | Opening Range Breakout Strategy

Forex Breakout Strategy | Opening Range Breakout Strategy.

Forex Breakout Strategy, there are many breakout strategies available for both professional and advanced forex traders.

The Forex breakout strategy you’re about to learn is a very result-oriented technique.

The above strategy has given the largest gain and profit to many traders of the world. 

By this post, you will learn and draw the forex breakout strategy with the help of trendlines(diagonal lines) and understand the possible targets.

I use the above breakout strategy with 4 hour and daily charts.

Both timeframes are the best for the breakout strategy, and that’s why I am using them in my trading style and way of trade.

What is a Breakout?

Before we apply the Forex breakout strategy on daily or 4 hour charts, It is better to explain the word “breakout” first.

Any price movement broke outside of the support or resistance zone that is called “breakout.”

We can watch breakout on the chart with both a horizontal and diagonal levels, depending on the price action pattern.

Let’s start the most common breakout patterns that occur in the Forex market.

Bullish Forex Breakout Strategy

Sometimes, we found that the market is going very strongly towards the upward direction, but suddenly it reached two swing resistance levels and stopped to move further up movement.

After two unsuccessful attempts, the market finally broke through resistance.

Bullish Breakout

But Keep in mind, 50% to 60% chance for taking retracement after the breakout.

This means the market again comes to the point where it broke.

Bearish Forex Breakout Strategy

Both bearish and Bullish breakouts are the same; only this time, the market broke to the downside.

After two unsuccessful attempts, the market finally broke through support.

bearish-breakout

But Keep in mind, 50% to 60% chance for taking retracement after the breakout.

This means the market again comes to the point where it broke.

Four parts to understand the Forex breakout patterns.

 1-Breakout 2-Retest 3-Support 4-Resistance

One trend line is called support, while the other is as resistance, and we have to follow the breakout and retracement, which is called a “wedge.”

forex-breakout-strategy

The breakout to this pattern occurs when the market eventually breaks to one side or the other.

While a wedge is mostly a continuation pattern, I tend to trade it based on whatever way the market breaks.

In other words, I let the market show its hand before making any considerations about future price movements.

Executing the Forex Breakout Strategy.

breakout-trading-strategy-entry

When you are ready to trade, you must understand the above chart before going to trend.
First of all, you have to draw support and resistance trendlines as it is already showing on the chart, then you follow the breakout candle; let to close the breakout candle.
And after that, you have to wait till it completes its retest from it broke. Sometimes it does not achieve its retracement and goes for the trend to the direction and stops for consolidation.
If it has reached where it broke, you wait for the next candle that must be on bearish close, and that’s your target or entry candle.

breakout-risk-to-reward-ratio

After deciding to trade, you must keep risk and reward ratios in your mind because you may go for a huge loss or huge profit if you for open trade and this my advice to you.
I have some risk-reward ratio strategy that you may follow that are 1:2, 1:3, 1:4 risk-reward ratio.
And the above example, I have taken a 1:4 risk and reward ratio.
13 pips for stop loss and 50 pips to take profit, and it is close trade, either I will go profit or maybe for loss because I decided what I wanted.

 

 

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About Muhammad Shahid

My name is Muhammad Shahid, MBA in Finance from IBA, University of Sindh, Professional Forex Trader & Trainer, I have taught more than 850 Students throughout the Sindh.

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