Most traders spend their time trying to predict when a trend might occur but prediction is impossible in the Forex market and these traders end up losing. Most novice traders never use the strategy we are going to look at but that's actually good news because as we all know 90% of Forex traders don't make money.
If you look at charts of currencies, you will see how all the biggest and best trends start and continue and that's by breaking resistance and when they have done this the trend accelerates and this pattern repeats again and again - so a great way to make money is to trade these breaks in price and we will look at how to do this in a moment but first, let's look at why the average trader won't trade these moves.
When most traders see a breakout above resistance, they think:
"I have missed the start of the move so better wait till the price pulls back so I can get in at where the trend started"
The problem for this trader though is - the price doesn't pull back it moves forward and this trader never gets in the trend.
To trade breakouts you must have the right psychology and understand, it doesn't matter if you miss a small proportion of the move because, there is still a lot of profit ahead of you. Your aim is to make profits and nothing else matters! Its a fact if you could catch just 50% of every major currency trend you would be very rich.
When trading breakouts, you need to be patient, not every break above resistance is going to follow through - so what are the best breaks to trade?
In terms of this trading strategy, you should focus on levels of resistance which have been tested many times in the past before the break and its the more times the better. Always look for a good number of tests and I would recommend at least six before looking for a breakout.
In the next article, in this series on trading breakouts for profit, we will look at some simple indicators to help you increase the odds even further but for now you have a simple trading methodology which is very simple to understand and makes huge gains in just 30 minutes per day.
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