Breakout Trading strategy
Breakout strategies are most common among traders and yet, most of the traders losing their money at some point, the only ones who are really making money out of it are the ones who doesn’t follow the conservative rules, in order to make money you should become a professional trader, and knowledge is the key of how to become a successful binary option trader.
We get lots of comments from traders who are following our weekly news analysis we publish every Sunday, one of the common questions we get from traders is ‘how do I see a breakout’ ,
So here are the step-by-step guide
How to recognize a breakout
- Select your asset and decide which timeframe you would like to trade (candle stick chart)
- Get a real picture – zoom out two time frames, from the time frame you decided, for instance, if you like the binary option of 5 minutes timeframe you should zoom out two time frames which is in most cases 15minuts à 1 hour
- Mark the overall trend, for more information here is a how to set a trend line and to mark the trend guide
- On the timeframe you decided, a genuine breakout has to comply with the followings:
- The price of the asset needs to go over the trend line you marked
- The breakout candle should close in the range that is out of the trend line (above from resistance line and below if it’s a support line)
- Most of the candle length is above/below the trend line
A breakout from resistance line trend:
A breakout chart from support line trend:
Now when you understand how to mark a trend and how to recognize a breakout, now it’s the right time to select a breakout strategy that will fit to your needs and your character as a trader.
The following breakout strategy has a non-conservative approach while most of the conservative strategies will suggest you to simply hit a trade once you see a break-out, if that was the case, we all would have become a millionaires, as a thumb rule, whenever you see a straight forward strategy that is very simple to adopt the chances to win will not be as good as you think, on the other hand, if you review a super complex strategy it will be very difficult to trade and gain money upon, so here it is..
Breakout strategy for binary option
I named it fall back breakout, the name of the game is patient and accuracy,
If you follow the exactly the rules, it can be your ultimate strategy for binary option trading you will use.
First, you look for the right setup, than you wait for the right timing.
Mark a trend
- Wait for breakout
- Once you see a breakout wait for the price to touch the trend line again but from the other side (see chart)
- Once the price hits the trend line again it’s time to hit the trade on the breakout direction
In the below chart there are two false breakout attempts (red arrows), trader that would have tried to bet on those breakout eventually he will end up with losing his trade
Therefore it is better to see a full breakout from a long trend line and just to wait for the price to retrieve back to same trend line, once it happened than it’s the best timing to hit a trade in this case a put option
Here is the same strategy with a breakout for downwards trend:
Same as the instructions, in this example you don’t hit the trade at the first candle you wait for a retrieve, in this case it’s the candle right after the breakout candle, as you can see it can be very much beneficial…
The big advantage of this strategy is that you don’t need to hit the trade once a breakout happen, usually it happen too fast and you miss or you enter to a trade when it is less beneficial
You just need to watch closely after the breakout occurs.
For each strategy you embrace to your trading plan you need to have a structured money management plan, now this is important and relevant for ALL strategies, now every trade will work for you exactly as you expect it, some of the binary option you bet will not hit the money, that’s’ why you should begin with small amount of risk, if you lose your first trade, do the same and increase your amount.
My recommendation is not to risk above 2% of your overall total.
How market events affect the strategy:
Before you start trading you should get information, each and every trade is counted and eventually you want to reach the goal of making money from binary option, before you start a trade you should be aware of surprises that might pop-up while you trade
I’m talking about market events and news, especially when dealing with breakout strategy, each event like this can be the reason for a breakout, most of the events are scheduled in advanced, before you start trade you should follow and see what is planned for the same date, here is a link for a great event calendar I use : http://www.forexfactory.com/calendar.php
I hope you will find this great strategy useful,
Please drop me a line here for any question or comment you might have,
Before you start using this strategy, please review our Risk Disclaimer