Forex trading can be a profitable venture, but it requires skill, knowledge, and a well-planned strategy. One such strategy is the GBPUSD breakout strategy. This strategy involves identifying key support and resistance levels, waiting for a breakout, confirming the breakout, and then entering a trade. In this article, we will discuss this strategy in detail, including its advantages and risks.
The GBPUSD breakout strategy is a forex trading strategy that involves identifying key support and resistance levels on the GBPUSD chart. Traders then wait for a breakout, which is when the price moves above a resistance level or below a support level. The strategy is to enter a trade in the direction of the breakout and manage the trade using stop loss and take profit orders.
This GBPUSD breakout forex trading strategy is meant to catch the early market breakout of the GBPUSD currency pair during the European forex trading session.
You can also use it with the pair of currencies EUR/GBP if you want to.
Why EURGBP and GBPUSD?
because these two pairs of currencies are often traded a lot during the European forex trading session.
Here’s How It Works
The whole point of the GBPUSD breakout strategy is to try to get into a trade very early in the day, right before the marker or price starts to set its trend for the day.
Why?
Well, if you can get in early, you can usually make the most of the day’s trend.
So, how do you start trading early?
Answer: You need to know what time the London and Frankfurt markets open in the morning.
At 7:00 AM GMT, the Frankfurt Stock Exchange opens.
The London Stock Exchange opens an hour later, at 8 AM GMT.
Currency Pairs You Can Trade
You can trade GBP/USD and EUR/GBP.
Timeframes To Trade?
For this GBPUSD breakout strategy, you need two time frames: the one-hour and five-minute periods.
Any Forex Indicators Required?
With this forex trading system, you don’t need to use any forex indicators.
GBPUSD Breakout Forex Trading Strategy Rules
You need to be ready to trade with this system before the European Forex Market opens.
- First, open the 1-hour chart for GBPUSD or EURGBP.
- Mark the highs and lows of that 1-hour chart with two parallel horizontal lines.
- Then, switch to a 5-minute chart and wait for a candlestick to close outside of the tunnel.
- If it closes above the top line, you can start a market order or put a pending buy stop order 2 pips above that candlestick and wait for it to be activated. If a 5-minute candlestick closes below the bottom line, you can sell at market price or set a pending sell stop order 2 pips below the low of that 5-minute candlestick.
- Your stop loss should be 2–10 pips away from the tunnel lines.
- Use a risk-to-reward ratio of 1:3 to figure out your take profit or use the swing highs and swing lows from the past as profit targets.
- a simple trading system based on price action and breakouts
- During the day, you can make anywhere from 100 to 150 pips if the breakout happens and the trend is real and good.
- If you have a day job, you can use this as a forex trading strategy that you can set and forget.
- You can only make one (at least) or two (at most) trades per day, which keeps you from trading too much (which is good!). In forex trading, less is more.
- No forex trading system is the holy grail, and price movements called “whipsaws” can cause your stop loss to be hit.
- Sometimes the tunnel distance can be very long, which is bad because it makes the risk-to-reward ratio much worse. What I mean is that I don’t make the trade if the tunnel distance in pips (the difference between the high and low) is more than 40 pips.
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