Trading on market conditions that are trending strongly is very profitable. Trend followers traders always observe the direction and strength of the trend to get the most appropriate entry opportunities. The only way to obtain maximum profit from trending conditions being strong is the technical breakout or breakout highs or lows.
Here's an example of a state that is strong downtrend characterized by the formation of a lower high levels (lower highs) and low levels lower (lower lows). Traders wait for the best opportunity to sell the technical breakout entry.
As shown in the picture above daily chart, in May of 2014 EUR / JPY has declined by 582 pips calculated from a high in March 2014 (the highest at 143.78 level), with levels forming a lower high and lower low. It can thus be concluded that the movement of this currency pair downtrend is strong.
Trading with technical breakout
In circumstances such as the example above downtrend, first determine the level of support that is closest, then the lows today. From the definition of being a strong downtrend, EUR / JPY will surely establish new lows in order to state a downtrend may continue. The most effective technique for breakout entry in this situation is to use a pending order, the sell stop or sell below the current market price.
Level entry (sell) below the lowest level should be determined at this time. To be more accurate to use a lower time frame, in this example example time frame of 4 hours (H4). Specify the level of stop loss and targets (take profit) in accordance with the risk management that you agree. Your order will be executed when the price has touched the level of entry you have specified.
Lowest level at this time is 137.96 and traders must put its entry level below that level. Aggressive traders will determine the sell entry level as close as possible to the lowest level at this time, could be to within 1 pip course, being a conservative trader will determine the level of entry is rather far from the lowest level. If below the lowest level there is a strong support level, then you should set the entry level below the support level.
Stop loss level above the lowest level can be determined at this time in accordance with the agreed money management. In order to obtain optimal results, it should be the risk / reward ratio above 1: 1.
