Trade Channel Breakout

When price action gets bound in a trading range, it might continue to move back and forth between the support and resistance levels for sometime before it makes a breakout either on the upside or downside. This breakout can be triggered by a sudden shift in the underlying fundamentals in the market. Trading breakouts is always highly profitable if done correctly. Get the Sublime Forex Champions MT4 Multi Indicator Scanner FREE that tells the market direction of any currency pair on 8 different time frames. Download this highly profitable Magic Breakout Forex Strategy eBook by Tim Trush and Julie Lavrine FREE that explains a unique way to trade breakouts with the Channel Commodity Index (CCI) Indicator. Whatever, you should download this FREE Forex Srategy eBook that explains how you can distinguish between a false breakout and a true breakout! First practice on your Forex Demo Account and double it three times in a row only than think of trading live!

When the price action bursts out of the upper channel, it will tend to move in the upward direction and in the same manner when the price action bursts out of the lower channel, it will tend to move in the downward direction. It is always good to place the entry and exit stops close to these channel lines to be on the safe side when trading channel breakouts.

A rectangular channel is formed when the two trendlines are horizontal. In case of a rectangular channels, figure out the vertical pip range of the channel. The narrower the vertical pip range, the higher the chances are for the successful breakout. Now, you can trade a rectangular channel on both sides.

Now, first you need to identify the channel on an hourly or daily chart. Then you should confirm price momentum with MACD ( Moving Average Convergence Divergence) or RSI ( Relative Strength Index) indicators. Place a market or stop entry price order just a few pips away from the breakout.