Breakout of the level on Forex.

Beginners often hear about breakout strategies, and most professional traders acknowledge their high effectiveness. What is a breakout in Forex, and how is it used in trading?.

A breakout is when the price breaks through a certain price limit, which for a time served as a barrier to further growth or decline. It was near this boundary that the price had previously reversed, but then the breakout occurred, and the currency pair's price surged further.

Before getting to the heart of the matter, it's worth clarifying the different types of Forex levels.

Commonly, there are the following types of Forex levels: support and resistance lines, historical levels, and simply important points on the chart, which, when reached, cause the price to reverse.

Support and resistance lines are drawn based on significant price highs and lows, defining a price corridor within which the exchange rate moves. Sometimes it reaches the upper limit, then falls back down.

Important points are also called base points, as they act as a psychological barrier that prevents the price from moving further. For example, a price level of 1.0000 or 1.5000 is always difficult to overcome, but if the rate manages to break through this level, it will likely move further in the direction of the breakout.

Historical levels are determined based on technical analysis of previous time periods. For example, if the EUR/USD exchange rate has not risen above 1.2500 for a week, this would be our historical level.

A breakout occurs when the price not only reaches a certain level, but continues to move further. This can be either true or false.

• True: the price continues to move in the direction of the breakout for a fairly long period of time; this value will be strictly individual for each time frame.

• False: the rate, having passed a couple of points, makes a reversal and returns to its usual range. It is this option that most often causes the majority of losses, so before opening a position, you should first receive confirmation of the breakout.

Trading strategy.

As mentioned at the beginning of the article, this aspect is often used in various forex strategy options. They all rely on one principle: if a level is broken, the price is highly likely to move further, so it is customary to open trades in the direction of the breakout.
You will find a description of the trading strategy itself in the material " Level Breakout Strategy ".