Breakout trading strategies for beginners - TopAsiaFX

026, Dec 2021

I welcome readers to our trading blog. Today, I’d like to write about the beginner trading strategies that use channel indicators, which are always treated as a separate category. Such simple Forex trading strategies suggest entering a trade at the time of the channel breakout or the price rebound.

Trading skills here are necessary to distinguish between the correction or the inertial price movement and the major trend direction. From this article, you will learn about price levels and simple forex strategies that work, based on them; you will also learn forex strategies that apply combined indicators.

Breakout trading strategies for beginners

Any forex trading strategy for beginners is made based on a particular regularity. It doesn’t matter if it is about fundamental or technical factors. An example would be entering a trade after certain events (news publications) or when any indicators meet with each other.

A separate group includes strategies built on the breakout of any important level or channel. Another way to interpret such kind of strategies is when the price returns in the channel after the rebound from its border or the rebound from the important level.

The difficulty in trading with such strategies is to find out whether the price will break out the level or it will reverse. I will describe the important trading levels and give examples of real strategies with channel indicators.

Trading levels and level-based forex strategy

The psychology of forex level and channel strategies is that traders behave in the same way in particular situations, and trading together with the majority is often quite efficient. The psychology principle is as follows:

  • Each trader expects a particular target profit and each trader has his/her own risk limit. It is expressed in the fact that traders put stop losses and take profits at particular levels and these levels are the same for the majority. This is how strong support and resistance levels appear. Support is the level, below which don’t let the price fall; resistance is the level, above which bear don’t let the price grow. The strategy is based on that you enter a trade in the opposite direction when the price reaches the level, that is, you open a position on the price pull-back in the direction of the reversal.

  • The level breakout means that there have been come fundamental factors that encouraged most traders to open positions even when the price reaches the psychological level. It means that if their price hasn’t rebounded, a strong trend appears.

Both trading ideas are well illustrated in the chart of market capitalization. Continue reading on LiteFinance.