Effective Forex Breakout Indicator

Trading forex breakout is one of the most popular strategies that most traders love to use. The reason why it is so popular is because of its ease of execution and it can even be used by new traders as well.

However, there is a major problem for those who want to trade forex breakout: Fake outs. The fake out is one of the most common reasons why traders lost their money when trading breakout. It is a sudden fake movement of a price in a certain direction leading the traders to believe that a breakout has occurred and then placed positions in the direction of the fake movement.

What happened next is the price suddenly moves back and then triggers all the stop losses that are set by those traders who enter their trade. Therefore it is very important for those of you who are interested in trading breakout to learn how you can make use of some indicators that are known as forex breakout indicators to increase your odds of winning.

Here are some forex breakout indicators you should use

1) Bollinger Bands: This is an indicator that has an upper band and a lower band to help you check the volatility of the currency you are trading. Before a breakout occur, the price usually will consolidate and then compress. This can be observed by using the bollinger bands as consolidation can be seen when the bands are narrow and a breakout occur when the bands become wide.

2) Moving Average Convergence Divergence: This is also known as MACD and this is the tool that you will be using to help you confirm a valid movement. Using the Moving average convergence divergence indicator, you will be able to more effectively avoid fake outs which will then increase your odds of winning in trading. You can use the MACD and its trigger line as well as the histogram to help you confirm a valid breakout. When you see the price breaching a trend wall, you need to have the crossover of MACD and its trigger line to confirm it as a valid movement. If the price breach a trend line or trend wall and you do not have a crossover in action, you are most probably seeing a fake out.

3) Stochastic: The next forex breakout indicator you can use to help you in this kind of trade is the stochastic. It will be best if you are patient to wait for the stochastic to go oversold before you enter a trade for a bullish movement or wait for the stochastic to go overbought before you enter a trade for a bearish movement.

With these 3 forex breakout indicators on hand, you will be able to trade more profitably with breakouts as you will be able to more effectively avoid fake outs which is the main killer for traders.