I should have written concerning this support level forex breakout forex trading strategy within the very starting and that i thought I did however once I checked, I couldn’t notice in of forextradingstrategies4u therefore here it’s women and gentlemen!
The support level breakout forex trading system may be a price action trading system, it’s one amongst the best, best trading setups to identify and trade…even a six year previous can trade forex using this method.
This support level breakout forex trading strategy is completely different from the horizontal support and resistance trading strategy wherever you trade the bounce of the price on the support and resistance levels.
But 1st up, let me provide you with little bit of context concerning a way to trade support level breakouts.
A support level breakout is once you see price break a support level and and continues to move down, during a downtrend.
So once a support level is broken, it means that the market is in a very downtrend.
Referring to the GBPJPY 4HR chart below:
- the blue boxes represent support levels
- and the white arrow indicates the candlestick that broke the support level and CLOSED below it.
As you’ll be able to see on the chart on top of that as later support levels got broken, the market continuing to maneuver more down.
This forex trading system may be applied to any currency pair.
For timeframes, it’s preferred to use 1hr and upward however having aforesaid that, you’ll additionally use this method and trade the tiniest timeframe just like the one minute.
Heck, you’ll be able to even use this method as a forex scalping system if you’re thinking of trading within the one minute timeframe.
Trading support level breakout is basically easy. Remember, its solely sell trades you’re aiming to take here.
Here are the trading rules:
- identify the support level and you can draw a horizontal line if you wish too but it does not really matter as long as you can see the support line.
- when price comes down and touches that support level, you must sit up and take notice and wait for the breakout candlestick. The breakout candlestick is the candlestick that closes below the support line after intersecting it.
- Place a sell stop order 2 pips below the low of the breakout candlestick.
- Place your stop loss 2 pips above the high of the breakout candlestick or just 2 pips above the high of the nearest swing high.
- Take profit should at least be 2-3 times what you risked or you can use this trailing stop technique to ride out the trend if you want.
Here’s the chart explaining the trading setup and rules:
As you can see, the support level breakout trading system is really simple to spot and trade.
I gave you two options for stop loss placement:
- 2 pips higher than the high of the breakout candlestick. the benefits of this can be that it’s a good stop loss and this could increase your risk:reward greatly once your trade goes well. the sole downside with this can be that it’s going to be quite near the entry price level and you’ll get stopped out prematurely.
- or two pips higher than the high of the closest swing high. The advantage of putting your stop loss here is that you just have less probability of getting stopped out from a trade untimely. the large drawback here is that typically, the stop loss distance to the closest swing high are going to be quite massive and this reduces your risk:reward ratio likewise as a result of price needs to move plenty of distance within the direction of your trade before you even reach a 1:1 risk:reward ratio.