Wednesday, June 10, 2009
Bank Opening Breakout Strategy
Trading on Breakouts is a profitable way when done right. When a market goes into consolidation, which means it is neither going up or down, it can breakout at anytime. This means that it can stop consolidation and then move very fast up or down. When that happens, we have a breakout and if we trade in the correct direction, we can achieve a huge profit.
A very good way to minimize risks when trading Breakouts is to trade when the banks open. This strategy is not basic but here’s the concept. When banks open, they will be doing cash transfers and such. During that time, a lot of cash maybe flowing and this will cause a currency’s value to drop or rise without turning back. So, you need to identify the bank opening times. Then wait for that hour and see which direction the market will move. Normally, before the bank opens, there will be a consolidation and when you see a breakout, wait for a while to be sure of the breakout direction. Then trade! There are many more factors to take into account like timing, Stop-Loss, Take Profit and etc and I will not cover them here. I’m just giving the basic concept.
Also, it isn’t everyday that this will happen. Sometimes, when the banks open, there will be not much movement in the price, making you wait for nothing.