Breakout Trading Strategy

Today I will be discussing about the breakout strategy as promised last week and yesterday (my beloved trading strategy),how to identify a possible breakout and how to ride with the trend that occurs after a breakout(like the saying "the trend is your friend").Breakout Strategy enables one to reap massive profits,it remains one of the most basic concepts in trading.

To identify a possible breakout one has to be on the lookout for a break of the support /resistance level of the day,in essence a breakout occurs after the price level crosses the support/resistance level.For example,the chart above shows a breakout of the support level 1.43706 (The blue dotted line represent the support level,which is the custom support/resistance indicator. The red vertical line represent the beginning of a new day and the red horizontal line represent also the support level).Also,the chart below shows a breakout of the resistance level 1.59835.

                                     

I use three indicators to trade possible and accurate breakout:

>My custom Support and Resistance indicator

>Exponential Moving Average (period 5,10,15)

>Relative Strength index (period 14,with additional levels of 10,20,50,80,90)

My custom support and resistance indicator helps me spot support and resistance level, then I use the exponential moving average indicators as a second confirmation to enter a trade, since the purpose of it is to smooth out price action over time and last but not the least is the Relative Strength Indicator (RSI) that helps me identify overbought and oversold region.