Currency Trading Basics - The Best Method for Forex Profits

By Monica Hendrix

January 7th, 2008

Read the article below or at Ezine @rticles - Currency Trading

Are You New to Currency Trading?

If you are new to trading and looking to learn currency trading basics and ways to make money, there are lots of different methods to choose from - we are going to show you a simple method that can make big profits and be at the heart of a successful forex currency trading strategy.

Currency trading is all about having a logical currency trading system you understand and can have confidence in. If you have confidence in your currency trading methodology, you can apply it with discipline and enjoy long term currency trading success.

If of course you don't understand a currency trading method and have confidence in it you will never be able to follow it with discipline and have no method at all.

Breakout Methodology - Why It Works in Currency Trading

This method is easy to understand, easy to apply and can and does make big profits.

The methodology we are going to look at here is currency trading breakouts.

This trading involves catching breaks of important highs or lows.

Fact:

Most major moves start from new market highs and lows and this method will catch them. Most traders make the mistake of trying to buy low and sell high and when prices breakout - they wait for a pullback - but these pullbacks never come and the trader is waiting to get on board, as the trade sails away over the horizon.

If you learn to trade these breaks you can make big profits - but how do you do it?

Let's take a look.

Using Support and Resistance in Currency Trading

You are looking for levels that are considered important by the market and you should look for at least 3 - 4 tests preferably in time frames that are wide apart.

Generally, the more times a level has been tested the more valid it is.

Confirming the Break in Currency Trading

You can and do get false breakouts, so it's important that any breakout on a forex currency trading chart is supported by rising and strengthening momentum.

How do you do this?

You need some momentum oscillators to help you - we don't have time to discuss these in full detail here but you can simply look up our other articles.

If momentum supports the break, you have a forex currency trading signal you can execute.

Stop Loss in Currency Trading

Your stop loss level is obvious - and is behind the breakout.

Why Most Traders Don't use Breakouts in Currency Trading

Most traders find a breakout method hard to follow because they think they have missed a bit of the move and wait for the pullback - but history shows the big breaks don't come back, they carry on and the odds are in your favour.

Patience is the Key to Currency Trading!

The key with breakout currency trading is only trade valid breaks of support and resistance and be patient until they come around. You don't get paid for how often you trade in currencies - you get paid for being right with your forex trading strategy and that's it.

A Simple Methodology Which Works for Currency Trading

All the best forex trading methods are simple but don't be deceived, that doesn't mean you won't make money with currency trading breakouts - you can. Most of the top traders in the world use breakout methodology to some degree in their currency trading.

When you learn currency trading basics, you need a methodology to base your currency trading system on, breakouts are ideal and can lead you to long term currency trading success.

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