Forex Breakout Profits: The Definitive Guide

Learn exactly how I trade Forex breakouts for consistent profits in this step by step guide
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Instructed by Justin Bennett Business / Finance
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  • Lectures 27
  • Contents Video: 1.5 hours
    Other: 1 hour
  • Skill Level All Levels
  • Languages English
  • Includes Lifetime access
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    Available on iOS and Android
    Certificate of Completion
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About This Course

Published 11/2014 English

Course Description

Have you ever wondered how professional Forex traders make consistent profits? Well this is your chance to find out.

This course will teach you exactly how I trade two very simple breakout strategies that have been extremely profitable for me since 2011. The patterns and trading strategies taught here are easy to learn and can be applied by anyone, regardless of trading experience.

Who should take this course:

  • Anyone who wants to gain financial freedom through the Forex market
  • A new Forex trader in search of simple trading strategies that produce consistent profits
  • Intermediate to advanced traders who want to supplement their current trading strategies to make more profits with minimal risk.

So whether you're a new trader in search of a profitable strategy, or you simply want to add to your trading arsenal, this course is for you!

This course will teach you how to:

  • Quickly identify wedges and channels
  • Make precise entries based on price action
  • Protect your capital with an appropriate stop loss placement
  • Use a proper risk to reward ratio for massive profits with minimal risk
  • Profit each and every month with these simple strategies

This course can be completed in one to two days. Lifetime support provided by Justin Bennett through the student discussion forum.

What are the requirements?

  • Basic Forex knowledge is helpful, but not required
  • A demo trading account with a Forex broker

What am I going to get from this course?

  • Identify highly profitable price action patterns in the Forex market
  • Trade breakouts from technical patterns that occur each and every month
  • Start earning consistent profits from the Forex market

What is the target audience?

  • Anyone who wants to become a consistently profitable Forex trader
  • This course is not a "get rich quick" plan, but it will teach you trading strategies that are highly profitable
  • Become your own boss - if you have a passion for trading this course might just set you free
  • This course may NOT be for you if you enjoy using indicators or prefer trading the smaller time frames

What you get with this course?

Not for you? No problem.
30 day money back guarantee.

Forever yours.
Lifetime access.

Learn on the go.
Desktop, iOS and Android.

Get rewarded.
Certificate of completion.

Curriculum

Section 1: Forex Basics
Article

The foreign exchange market, also called the FX market or simply, Forex, is a 24 hour market. It is by far the most liquid financial market in the world.

Some of the players in this global marketplace are:

  • Banks
  • Central Banks
  • Investment Managers and Hedge Funds
  • Retail Traders (you and I)

These players create a market that exchanges about $5 trillion every day.

Article

The Forex market is a 24 hour global market. Although it does close over the weekend for retail traders, it's always open to accommodate international trade as well as the business activities of central banks and global industries.

There are four sessions that make this 24 hour marketplace possible:

  • London
  • New York
  • Sydney
  • Tokyo
07:17

Japanese candlesticks are a way to read the price action of a specific period of time. They consist of four levels that make up three parts.

Those four levels are:

  • High
  • Low
  • Open
  • Close

These four levels make up the following three parts of a candlestick:

  • Upper Shadow
  • Body
  • Lower Shadow

We can use the formation of candlesticks to indicate strength of weakness in the market. The most popular pattern is called a "pin bar". This is a candlestick with a very small body and a long upper or lower shadow, or "wick". It indicates a possible reversal point in the market.

04:48

Supply and demand are the two forces which cause a market to move up and down. They can be easily translated into support and resistance, which can be used to enter and exit trades.

Supply is when there are more units available at higher prices, thus pushing the market lower.

Demand is when there are fewer units available at higher prices, thus pushing the market higher.

We can use the concept of supply and demand to formulate ideas about where a market is likely to reverse. This allows us to identify key horizontal levels in the market as well as channels and wedges.

04:06

A Forex breakout occurs when a currency pair breaks through a key level of support or resistance. This can happen at a key horizontal level or trend line support or resistance.

For purposes of this course, we'll be identifying breakouts from channels and wedges. The same rules apply in that a level which is broken becomes its inverse. For example a broken resistance level becomes support just as a broken support level becomes resistance.

A level is deemed more significant depending on two factors:

  • Time
  • Touches

The number of times a market has touched a level and the amount of time the level has been of significance plays a major role in how reliable a breakout from that level might be.

A level must have at least 3 touches before the breakout occurs to be considered "tradable".

03:12

Using a proper risk to reward ratio is a key element to becoming a consistently profitable Forex trader. A proper risk to reward ratio means that you never risk more than half the potential reward.

This means that if your profit target is 200 pips away, your maximum stop loss distance should be 100 pips. It's okay if your reward is greater (300 pip target and 100 pip stop loss) but it can never be less than twice the distance of your stop loss.

We can represent a risk to reward ratio as an R-multiple. So a 200 pip target and 100 pip stop loss becomes a 1:2 risk to reward ratio, or simply 2R. A 250 pip target with a 100 pip stop loss would be represented as 2.5R.

Section 2: Getting Started
11 pages

Notes to section 2 including setting up your charts, currency pairs to watch and the "best" time frames to trade Forex.

04:17

The default template provided by MetaTrader isn't conducive to trading simple price action. Therefore we want to change this to something that is much easier to "read".

A great color scheme to use for trading price action is a simple "black on white". MetaTrader provides this option by default. In addition to the color scheme, you will want to remove all indicators from your chart.

Once you have your chart exactly how you want it, you need to save it as a template. You can do this by right clicking anywhere on your chart, selecting "Template" and clicking "Save Template" from the drop down menu.

Now when you open a new chart, you can choose your saved template by following the directions above, only now you will select the template you just saved from the "Template" drop down menu.

Article

Deciding which currency pairs to trade is a personal decision, however here is a list of some of the pairs I watch.

I recommend choosing at least 10 to 15 currency pairs to watch for setups. This will give you a much greater selection to choose from, which will help you avoid trading subpar setups.

You may want to go through each of these currency pairs and take a look at how each one moves. They all have their own "personalities" and it's important that you choose the ones which resonate with your own personality.

It's also important to check your broker's spread to ensure it's favorable. This is especially true for some of the more exotic currency pairs.

Article

The two time frames we will be focusing on in this course are the:

  • Daily
  • 4 Hour

Although I occasionally glance at the 1 hour and even the weekly time frame, I do 99% of my trading on the daily and 4 hour time frames.

These higher time frames provide a more user-friendly trading environment. They accomplish this by doing the following:

  • Act as a natural news filter
  • Easier to develop a directional bias
  • Produce quality over quantity
  • Reduce trade frequency
Article

There are two common objections to trading the higher time frames. Those objections are:

I don't have enough money

The higher time frames can be traded regardless of your account size. The size of your stop loss doesn't matter. What matters is your risk to reward ratio on any given trade.

Trading higher time frames is boring

Trading isn't about excitement, it's about making money. You should have a passion for trading and love what you do, but there's nothing more enjoyable than making money as a trader - that's where the higher time frames can help.

Section 3: Wedge Breakout Strategy
12 pages

Notes to section 3 including wedge characteristics, entry strategies, stop loss placement, determining profit targets and calculating a measured objective.

08:21

Wedges, also called triangles, are consolidation patterns which typically occur after an extended move up or down. They are also considered continuation patterns in that the market generally breaks in the direction of the preceding trend.

Although typically a continuation pattern, it's important to wait until the market closes outside of support or resistance on the 4 hour or daily time frame before considering an entry.

You need three or more touches off of support or resistance before the breakout in order for the pattern to become "tradable".

04:52

The best way to identify wedge patterns in the Forex market is to look for areas of consolidation where the market is making higher lows and lower highs. Again, you need at least 3 touches on each side for it to become a tradable pattern.

The levels should be placed at the extremes of each candle while attempting to get the most touches possible. This is the most conservative approach and will help you avoid false breakouts.

05:12

In order to trade a wedge breakout, you need to wait for the market to break support or resistance. This means that the market must close outside of support or resistance on the 4 hour or daily time frame, depending on which time frame you're using to identify the pattern.

There are two main ways to enter a wedge break:

  1. Enter on a 4 hour or daily close
  2. Enter on a retest of the broken level

Just know that there's no guarantee that the market will retest the broken level, so there is a chance of missing the trade if you go with this approach.

03:36

A stop loss will protect you if the market moves against your position. You want to be sure to place your stop loss at a level where if hit, you no longer want to be in the trade. In other words, if the market reaches your stop loss the trade setup has been invalidated.

There are two stop loss strategies you can use when trading wedge breakouts.

1) Above or below the bar which broke the level

This is the more aggressive approach. It's best used when the bar is much larger than any of the surrounding bars.

2) Above or below the last swing high or low respectively

This is the more conservative approach and is recommended in most situations.

05:15

The first profit target for any wedge breakout should be the first swing high (for breakouts to the upside) or swing low (for breaks to the downside) that started the pattern.

The great thing about this approach is that you will always have a clear target.

The second target should be a price action level you identify in the market. There is often an obvious level at which you can identify a second profit target.

It's important at this stage to evaluate your risk to reward ratio to ensure it's at least a 2R. This should be done before entering the trade.

See the next lesson on measured objectives for an additional method of identifying a profit target.

05:05

Using a measured objective provides you with a way of identifying a profit target by using the first move of a wedge pattern.

The measured objective is found by taking the distance in pips of the very first move of a wedge pattern, and then projecting it to a future point in the market once the pattern breaks.

Although it can be quite accurate, a measured objective should be thought of as a possible target area and not an exact level in the market.

7 questions

Test your trading skills and see if you're ready to start trading wedge breakouts

Section 4: Channel Breakout Strategy
8 pages

Notes to section 4 including channel characteristics, entry strategies, stop loss placement, determining profit targets and calculating a measured objective.

04:38

Channels are consolidation patterns which typically occur after an extended move up or down. They are also considered continuation patterns in that the market generally breaks in the direction of the preceding trend.

There are four parts to every channel pattern:

  • Preceding trend
  • Support
  • Resistance
  • Continuation or the resulting move after the break

Although typically a continuation pattern, it's important to wait until the market closes outside of support or resistance on the 4 hour or daily time frame before considering an entry.

You need three or more touches off of support or resistance before the breakout in order for the pattern to become "tradable".

02:28

The best way to identify channels is to look for consolidation which is making equal highs and lows in the market. In other words, look for areas where a support trend line would run parallel to a resistance trend line.

It's best to place the levels at the extremes of each candlestick while attempting to get the most touches possible. This will help you avoid false breaks once the market closes outside of support or resistance.

You need two touches in order to draw a level, but three touches makes it a tradable pattern.

04:03

In order to trade a channel breakout, you need to wait for the market to break support or resistance. This means that the market must close outside of support or resistance on the 4 hour or daily time frame, depending on which time frame you're using to identify the pattern.

There are two main ways to enter a channel break:

  1. Enter on a 4 hour or daily close
  2. Enter on a retest of the broken level

Just know that there's no guarantee that the market will retest the broken level, so there is a chance of missing the trade if you go with this approach.

03:13

A stop loss will protect you if the market moves against your position. You want to be sure to place your stop loss at a level where if hit, you no longer want to be in the trade. In other words, if the market reaches your stop loss the trade setup has been invalidated.

There are two stop loss strategies you can use when trading channel breakouts.

1) Above or below the bar which broke the level

This is the more aggressive approach. It's best used when the bar is much larger than any of the surrounding bars.

2) Above or below the last swing high or low respectively

This is the more conservative approach and is recommended in most situations.

02:50

The first profit target for any channel breakout should be the first swing high (for breakouts to the upside) or swing low (for breaks to the downside) that started the pattern.

The great thing about this approach is that you will always have a clear target.

The second target should be a price action level you identify in the market. There is often an obvious level at which you can identify a second profit target.

It's important at this stage to evaluate your risk to reward ratio to ensure it's at least a 2R. This should be done before entering the trade.

See the next lesson on measured objectives for an additional method of identifying a profit target.

03:45

Using a measured objective provides you with a way of identifying a profit target by using the first move of a channel pattern.

The measured objective is found by taking the distance in pips of the very first move of a channel, and then projecting it to a future point in the market once the pattern breaks.

Although it can be quite accurate, a measured objective should be thought of as a possible target area and not an exact level in the market.

6 questions

Test your trading skills and see if you're ready to start trading channel breakouts

Section 5: BONUS: Two Highly Profitable Reversal Patterns
05:14

The head and shoulders pattern is a topping pattern which typically occurs after an extended move up. They can be a great way to identify a possible reversal point in the market.

There are four parts to the head and shoulders pattern:

  • First shoulder
  • Head
  • Second shoulder
  • Neckline support

There are two ways to enter a break of the head and shoulders pattern:

  1. A 4 hour or daily close below neckline support
  2. A retest of the broken neckline support, now resistance

Using a measured objective is a great way to identify a profit target after the break.

05:21

The double top pattern is a reversal pattern which typically occurs after an extended move up. They can be a great way to identify a possible reversal point in the market.

There are three parts to the double top pattern:

  • First high
  • Second high
  • Neckline support

There are two ways to enter a break of the double top pattern:

  1. A 4 hour or daily close below neckline support
  2. A retest of the broken neckline support, now resistance

Using a measured objective is a great way to identify a profit target after the break.

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Instructor Biography

Justin Bennett, Professional Forex Trader and Founder of Daily Price Action

Justin Bennett has been a student of the financial markets since 2003 and a Forex trader since 2007. After several years of struggling, he was able to persevere to become profitable in 2010 and has been profitable ever since. Justin now trades his personal account full-time from the comfort of his home.

He is also the founder and owner of Daily Price Action, where he has helped thousands of other traders find success through the use of simple price action strategies.

Justin has been featured by FXStreet, Forex Crunch, Currensee and Dukascopy.

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