Consequently any person acting on it does so entirely at their own risk. No representation or warranty is given as to the accuracy or completeness of this information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. This information has been prepared by IG, a trading name of IG Limited. Forex entry strategy based on breakouts, daily USD/JPY chart: In other cases, traders look for a confirmation candle close outside of the delineated key level. Entry is prompted by a simple break of support. The example below shows a key level of support (red), after which a breakout occurs along with increased volume which further supports the move to the downside. The basis of breakout trading comprises forex prices moving beyond a demarcated level of support or resistance.ĭue to the simplicity of this strategy, breakout entry points are suitable for novice traders. Price action expertise is key to successfully using breakout strategies. Breakout trading involves identifying key levels and using these as markers to enter trades. Using breakouts as entry signals is one of the most utilised trade entry tools by traders. Traders often look for multiple signs of trade validation such as indicators in conjunction with candlestick patterns, price action and news but for the purpose of this article we have isolated different strategies into their component parts for simplicity. This gives a stronger upward bias to the trader and endorsement of the hammer candlestick pattern. In this case, the entry has been identified after a confirmation close higher than the close of the hammer candle. It is known that the hammer signals potential reversals however, without some form of confirmation the pattern may indicate a false signal.

As you can see on the chart, the hammer formation is circled in blue.

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