Sustained Break Forex Trading Strategy

A sustained break is generally referred to as a break that has the power to close above/below a trend channel or to close above/below a critical level of support or resistance. A sustained break hints a continued move in the same direction of the breakout. Let’s have a look at some trading examples below for better understanding how i trade sustained breaks in the forex market.

I. Sustained break of a critical level of support

substained-forex-breakout

The euro/dollar closes below the support line in a down trending market. This hints at continued move in the downtrend.

Trading idea*:

  • Go short on a sustained break below support.
  • Place a stop loss 3 pips above the most recent level resistance level.
  • Use a risk to reward ratio 1:2 or better.

*You can use your own preferred method of placing stop losses and taking profits.

II. Sustained break of a rising trend line in an up trend

substained-forex-breakout-r

The euro/dollar closes below the rising trend line in an up trending market. This hints a market reversal.

Trading idea*:

  • Go short on a sustained break below the trend line.
  • Place a stop loss 4-8 pips above the trend line at the “breakout” candlestick.
  • Use a risk to reward ratio 1:2 or better.

*You can use your own preferred method of placing stop losses and taking profits.

III. Sustained break of a rising trend line in a downtrend

substained-forex-breakout-d

The euro/dollar closes below the rising trend line in a down trending market. The market is likely to continue the downtrend.

Trading idea*:

  • Go short on a sustained break below the trend line.
  • Place a stop loss 4-8 pips above the trend line at the “breakout” candlestick.
  • Use a risk to reward ratio 1:2 or better.

*You can use your own preferred method of placing stop losses and taking profits.

IV. Sustained break of a falling trend line in an up trend

substained-forex-breakout-f

The euro/dollar closes above the falling trend line in an up trending market. The market is likely to continue the up trend.

Trading idea*:

  • Go long on a sustained break above the falling trend line.
  • Place a stop loss 4-8 pips below the trend line at the “breakout” candlestick.
  • Use a risk to reward ratio 1:2 or better.

*You can use your own preferred method of placing stop losses and taking profits.

V. How to properly trade “high risk” sustained breakouts in the forex?

substained-forex-breakout-i

The euro/dollar closes above the resistance line in a up trending market. This hints a continued move in the current up trend.

Is it recommended to trade the sustained break in this particular case?

No. The EUR/USD has moved over 350 pips (big green breakout candlestick) and there’s risk for a significant price retracement of the huge breakout move. The risk being stopped out is too high. Stay out and wait for better trading opportunities or use the method explained below.

How to properly trade “high risk” sustained breakouts (see picture above)

A method quite often used by professional currency traders is to wait for a price return towards the resistance line which now becomes support. A trader could enter a long trade at point A when price touches the support line with stop loss just below the sustained breakout candlestick. This creates a low risk/high reward trading opportunity. This method can be used up-and downtrends, in any currency pair and timeframe.

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