Why Breakouts Could Prove the Ultimate Strategy for Forex Among the myriad of trading strategies that you can apply to your Forex account, the breakout strategy is one that could ultimately prove to be the most rewarding. A breakout occurs when the market price moves beyond a prior identified trading level. This could be a level of support or resistance, a move outside of a technical reading or a breakout from an overnight trading range for example. Whatever the trigger, the breakout is the point that price action pieces this level and the price surges into a new trading range. For a breakout to be successful it must be accompanied by increased volume. This is an important as without increased volume, it is unlikely that sufficient momentum will exist and the breakout will fail. The term false breakout is used for times when the initial break occurs, but insufficient momentum is behind the move for the price to maintain beyond the breach level. So why do we assert that breakouts could prove to be the ultimate strategy for Forex? Well, perhaps one of the most obvious reasons is that they have the potential to yield high gains. The strength behind a breakout can give a huge potential for pips to be booked. The speed and vigor with which a strong breakout can move can be one of the most profitable ways in which to build an account. There are however a number of other benefits to trading breakouts. These make this approach to trading beneficial for both new and more experienced traders. Benefit #1 One of the key benefits to trading breakouts is that they allow you to plan your trading in advance. You can analyze your charts to identify key levels where a breakout in price may occur. This will help you to shut out the noise from the markets and plan your trading. This will also give you plenty of time to check across timeframes and cross reference fundamental factors which may affect any potential trade. The advantage of this approach is that it helps to install good discipline. Planning and preparing your trading will go some way to preventing rash decisions at the point of trading. It will help to create a framework and add structure to your overall trading plan. Benefit #2 A benefit of being in a position to identify potential trading opportunities in advance is that you can also calculate the potential risk-to-reward on each outcome. This provides an important metric with which you can assess the performance merits of each potential trade. Successful trading very much comes down to balancing risks. Once you identify the break point you intended to trade, you can also look to identify areas that the market may run to. At this point you may want to close your order. Similarly, you will also need to identify a position where you can place your stop. This is where you will exit the market if the expected breakout does not follow through and reverses. In identifying your entry, take-profit, and exit points, you can calculate the risk/reward ratio on the trade. This will reveal if the risk makes the opportunity worth taking and ultimately will allow you to stack your trading in your favor. By the way, you can use our free Chart Pattern Helper expert advisor to completely automate your breakout trading.