If you want to make money at FX trading, using a breakout trading is a great way to make currency trading profits. Breakout trading is easy to understand, will always work as long as currency markets trend. You can put together a trading system, based on this methodology easily and quickly, so let's take a look at FX breakout trading is more detail.

The Logic of Breakout Trading

The logic of breakout trading is easy to understand and based on the way every major trend starts and continues and if you look at a currency trading chart you will see, that every major trend starts from a breakout to a new high or low and the trend continues and evolves in this way. As long as markets trend breakout trading will be a timeless way to make money.

Despite the fact it's obvious how every trend starts and continues most traders fail to buy or sell breakouts and the reason for this is that most traders want to predict the exact low or high of the market and breakout trading doesn't allow you to do this, you miss the first part of the move but this doesn't matter – why?

Because a trend in motion is more likely to continue that reverse and the odds are on your side. Instead of focusing on trying to predict which is impossible, the successful currency trader focuses on the profit potential in front of them. Always keep in mind of you caught 50 – 70% of every major trend you would be very wealthy, so forget about prediction and trade the odds.

Building a Breakout Trading System

Breakout trading strategies can be very simple and consist, of no more than support and resistance and few indicators to time your trading signals. A simple system, will be more robust than a complex one and give you a better chance of success, so don't complicate your breakout trading system - keep it nice and simple.

Of course, not every breakout will lead to a continuation in favour of the break and you need to be selective in the levels you trade. In general terms, the more times the level has been tested before the break the better the odds of success and the wider these tests are spaced apart in terms of time, the better the odds of success.

If you look for levels the market feels are important and there are six tests or more, spaced at least a month apart, you will increase the odds of success.

Money Management

When trading breakouts you have great risk to reward, because your stop is very close. should the breakout fail to continue, your stop is right behind the level which has broken, this gives you low risk and if the breakout is a good one, you can have ten times the profit or more ahead of you, in terms of the risk you have taken.

When trailing your stop, make sure you let the price move away from the breakout point and trail it slowly. Many traders make the mistake of moving their stop loss to close and put it within the noise of the market and are clipped out the trade to early and then, the trend continues piling up thousands in terms of profit and there not in! Always give the market room to breathe and sure, you will give some money back when the trend eventually turns but you can't predict that anyway so don't try.

Making the Strategy Successful

When you have your breakout trading strategy ready, you need to trade with discipline and execute your trading signals exactly as laid down by your trading system. Breakout trading strategies can have far more losers than winners but at the end of the day that doesn't matter. So long as your currency trading profits are far bigger than your losses and your account equity grows over time – that's all that matters.

Free FX Breakout Trading Strategies

You can get some great free FX breakout trading strategies which have been proven to make millions and you will find the rules to both the strategies below online so look them up here are the free breakout trading strategies:

Richard Donchian's 4 Week Rule

This is a one rule system which was devised by a trading legend Richard Donchian and has been making serious FX traders money for over 35 years, so look it up and don't be deceived by it's simplicity - it makes a lot of money.

The Turtle Trading Rules

The trading rules above were taught to a group of novice traders by Richard Dennis, to prove that with the right trading education and system anyone could make money. The group of traders who used this system, made over $200 million dollars in real time trading, in just 4 years. While the rules have become less effective, since they were first realized, the system still makes money and has all the elements a successful trading strategy should have and is worth looking at for the money management rules alone.

Final Words

Breakout trading is based on easy to understand logic and it's also easy to build a currency breakout trading system which has the potential to make big gains. If you are looking to make bigger currency trading profits consider using an FX breakout trading strategy and you will have a timeless way to enjoy currency trading success.