Why Breakouts Work in Forex Trading

For traders who like to catch big moves, breakout trading is time-tested methodology that yields profits when done correctly. Breakouts are especially helpful signals to follow in forex trading for two reasons:

  1. Forex trading is a 24-hour market so there are often periods of price consolidation
  2. Forex trading is often affected by news events (which often cause price breakouts).

A breakout occurs when the price moves above a resistance area or below a support area.

The goal of trading breakouts is to enter the trade just as the breakout occurs and continue until volatility dies down. With a market that never closes your ability to identify and trade breakouts increase. It’s important to pay close attention to the volatility of a currency pair. Pairs that have a low volatility allow you to set up your position to be ready when a breakout occurs.

A noteworthy study that appeared in the 2004 Journal of International Money and Finance by Evans and Lyons details the effects of news on forex prices. Interestingly, the study reports that the time frame of influence on exchange rates is not limited to seconds or minutes, but rather last for hours or even for days sometimes. The effect on returns will generally occur in the first or second day. However, the impact can linger until the fourth day. In contrast the impact on the flow of buy and sell orders is still strong on the third and fourth days.

Knowing when news reports are released and whether the information is positive or negative will help you trade the news to your best advantage.

The simple method for trading breakouts is to 

  1. Identify a lower-than-current price as support
  2. Identify a higher-than-current price as resistance
  3. Make an entry when the price closes beyond either of these two lines

Make sure to apply a stop-loss order when you enter a position on a breakout signal. This will ensure that you have defined and controlled your loss if the trend does not continue.

The disadvantages of trading breakouts are:

  1. The possibility of a false or failed breakout
  2. Breakouts can happen any time all around the clock.

To overcome these disadvantages, you need a method for filtering out false, or low-probability breakouts, and you need to be able to spot trades that can happen at any time. That’s where can help. The system’s algorithms never stop looking and are quick to alert you to high-potential opportunities.

The machine-learning AI also filters through trades looking for highly reliable breakout trades, to help make sure you don’t waste money one trades that whipsaw the price action.

The best way to trade forex

There are two ways to invest with our AI in forex:

1. Automated with AI-Trading. Check out the 3 steps to trade automated with our AI.

automated trading with ai bot

Don’t you have a broker account yet? Our AI is integrated to trade automated with the broker Oanda. Click here to open an account.

With Automated AI trading you do not need MT4 / MT5 and other trading platforms to invest in forex. All forex trades are automatically placed into your broker account and you can monitor the AI trading performance directly on our dashboard.

2. Manually with AI-Signals.

Wiseinvest also provides AI forex signals that perfectly fit into MT4, MT5 and any trading platform. To trade with our AI forex signals, you must simply copy the data you receive from each real-time signal into any forex brokerage account of your choice.

There are five unique variables for each AI signal, and each must be copied exactly, in order to match the performance of the signal as close as possible.

Each AI signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

You can trade forex with our free forex signals clicking here, or with our Premium subscription that provides you unlimited AI signals and automated AI trading in partner brokers. Whether you are a beginner or a Professional forex trader, our AI trading system can help you save time and improve your trading performance. Get started with free AI.

When investing through Wiseinvest automated AI trading or AI forex signals, you do not need to calculate or change the leverage in your forex broker account. Learn more about leverage in forex trading clicking here.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.