Simple at Epektibong Diskarte sa Forex (Bahagi 2)

Unang Bahagi : https://cutt.ly/6kWVSMa

Effective Trading Strategy: Breakout

Breakout is an example of a beginner's Forex strategy that is not particularly time-consuming - but it can test traders who lack patience and focus a lot on the results present, rather than focusing on the long-term results.

Step 1 - Setting up Forex trading strategy

The conditions are precise - that's why a breakout trader must already know exactly what to look for. This step will allow you to analyze a lot of charts quickly and focus only on the opportunities that suit you.

The essential condition for this beginners trading strategy is that the market is consolidating - in a relatively narrow area, the volatility is relatively low and the price corridor is horizontal, where buyers and sellers are more or less equal.

There are many ways to distinguish a consolidating market, but a beginner's Forex trading strategy uses a 200-day simple moving average (200SMA) on a daily chart. Why 200 ？ Because that's the number of days traded in a year, so you're basically looking at an annual average. So depending on the market and its average daily volatility, my 200SMA creates a price range - say 50 pips.

If the price closes above or below, it will be a breakout signal.

Step 2 - Entering a position with the CFD trading strategy

The entry rules for this trading strategy are simple. Each time the candle closes on one side of the 200SMA, you should enter in the direction of the stick fence.

Step 3 - Exit the position with the Forex trading strategy

The conditions for exiting a position are as important as those for re-entering it. This is true for every Forex trading strategy whether simple or complex.

In the worst case, the price on the 200SMA, meaning it was a false breakout. Neither buyers nor sellers have really made up their minds yet. Meanwhile, your stop loss remains 50-60 pips below the entry point. Therefore, if it is reached, you will lose this amount in pips. On the other hand, in case of a good position, the breakout of the SMA will develop into a trend that you can follow at a good distance of 50-60 pips behind the price, you will eventually move away from the SMA 200 into a profit zone that does not fall, which will stop only when the price corrects to hit your trailing stop loss.

The strengths of this simple Forex trading strategy are :

- An application of logic,

- Easy to apply,

- Easy to manage,

- If learned well, you will only have to check your charts once a day.

The weak point of this system consists of false breakouts which can occur the expected signal and appearance of directional movements, before observing them. As you test and look into the past, you will notice that it often gives false signals before usually the right ones, but with the exit rules, you will be able to make long term profits.

This debate is common among Forex trading strategies. By making the entry rules brutal, you will reduce your hesitation and the number of positions, although you may improve your success rate. Likewise, by making the exit rules brutal, you will reduce your losses, but you will also deprive yourself of sometimes profitable positions that can take place.

(To be continued ...)

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