fxcm-traits-of-successful-traders-guide

TRAITS OF SUCCESSFUL TRADERS: PART THREEHow to Trade the Majors During Active HoursWHAT IS A BREAKOUT?A breakout is when a currency that has beentrapped in a range or channel on the chartbreaks through support or resistance,escaping the channel. When this happens,the movement in prices tends to be verypowerful, and can create a tradingopportunity.Here is an example where the EUR/USDDaily chart had a channel for two months.You can see that when this channel broke,the move was swift and powerful.HOW DO YOU TRADE BREAKOUTS?Trading breakouts is almost the exactopposite of trading ranges. When price movesupwards through resistance, look to buy.When it moves downard through support, lookto sell. In the above example, a range traderwould have tried to sell at the top of thechannel and would have likely lost money.A breakout trader would instead have lookedto buy.Identifying a Price ChannelChannel Breakout Example1.501.4501.451.4451.401.4401.351.350February 2011August 201107/25/11 07/27/11CHART 3.3EUR/USD daily chart showing price channelSource: Appendix 3.2CHART 3.4EUR/USD five minute chart showing breakoutSource: Appendix 3.324