Forex breakout trading is based on the well known phenomenon in the markets that periods of very low volatility are followed by periods of very high volatility, and vice versa. Often, during the quiet periods, the price action will trade in a very narrow range, then suddenly “break out” of the price range with a rapid expansion to the upside or downside. Forex breakout trading can be very profitable if you get it right, because the price movements are so rapid and forceful that it can move 100 pips or even 200 pips in less than an hour.
Challenges Of Forex Breakout Trading
Obviously, as with any other Forex trading strategy, Forex breakout trading has its challenges for the beginner Forex trader. The biggest challenge with Forex breakout trading is to get the timing and the direction of the trade right. Getting the right entry price and the right exit price is easy, because there’s such a big move involved. A 2-3 pips difference entering the trade is nothing compared to the 100-200 pip profit at stake.
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